Working Papers

Presentations: FMA Doctoral Student Consortium Workshop (Fall 2022); Bertram Scholar Dinner (Fall 2022); Canadian Sustainable Finance Network Conference (Summer 2022); University of Toronto empirical microeconomics seminar (Summer 2022); University of Toronto financial economics seminar (Fall 2020; Fall 2021)

Abstract: As economic damages from hurricanes rise due to climate change, banks will need to invest internally to update their risk management framework. This paper tests whether financial distress affects a bank’s ability to adapt to emerging risks. Distressed banks are 6 percentage points more likely to accept loans exposed to hurricane risk and charge 65 basis points less for risky loans. This increase in risk taking is likely due to an under-investment in assessing hurricane risk, since results are stronger for financially constrained banks. Results are unlikely due to moral hazard, since distressed banks reduce exposure to conventional risks, such as borrower income risk. Financial distress affects a bank’s ability to adapt to emerging risks.

2. Climate litigation risk, investor learning and competitor firm spillovers

Presentations: UCLA Climate Adaptation Research Symposium (Fall 2021); Bank of Canada Graduate Student Paper Award Workshop (Fall 2021); EFA Doctoral Tutorial (Summer 2021); CIREQ Interdisciplinary PhD Symposium on Climate Change (Summer 2021); AFA poster presentation (Winter 2021); UT Austin PhD Symposium (Summer 2020); University of Toronto financial economics seminar (Fall 2019)

Abstract: This paper studies the dynamic effect of investors responding to climate risk, using new environmental lawsuits as a litigation risk shock. Investors are aware of climate litigation risk and share prices immediately drop by 2% for defendants and 6% for competitors in the same industry. ESG investors exit firms that are exposed to litigation risk and sell approximately 55,000 shares of competitor firms. The net effect of this investor turnover results in a decrease in environmentally-themed shareholder proposals by around 2% for defendants and 1% for competitors. Overall, an increase in climate risk exposure within an industry decreases public environmental engagement. Perceptions of climate risk also spill over to competitor firm valuations, so empirical studies that use competitor firms as counterfactuals may underestimate the aggregate investor response. 

3. Local information decay (Draft Available Upon Request) with Peter Cziraki, Jasmin Gider and Jordi Mondria

Abstract: This paper studies the dynamics of local investors’ information advantage using local newspaper closures and the trades of local and nonlocal investors. Following the closure of a newspaper, investors are 10 percentage points less likely than nonlocals to trade the shares of firms in the same zip-code, and reduce the share of their local holdings by 8 percentage points, or 50% relative to the average. Local investors also make lower risk-adjusted returns on their stock purchases and sales up to 6 months following a local newspaper closure. The differences are larger for investors who trade frequently and live outside of large cities. Our results suggest that local journalism is an important source of local investors’ information advantage, and, therefore, the home bias phenomenon.