Essays in Empirical Corporate Finance

Abstract

This thesis consists of three chapters on empirical corporate finance.

In the first chapter, co-authored with Bernardus Van Doornik, we estimate the effect of an increase in the availability of bank credit on the employment and earnings of high- and low-skilled workers using a bankruptcy reform that lead an expansion of bank credit to Brazilian firms. We use administrative data and an empirical strategy that compares changes in outcomes for financially constrained firms, which were disproportionally affected by the reform, with unconstrained firms. Following the expansion in credit, constrained firms increased employment and wages, especially of high-skilled workers. Using a model featuring collateral constraints and capital-skill complementarity, we estimate that the reallocation of resources induced by the reform accounts for 36 percent of the increase in aggregate productivity in Brazil during the 2000s.

The second chapter, co-authored with Basit Zafar, analyzes the effect of debt collection on consumer credit and financial health, employing credit record data and a research design that compares outcomes of consumers in states that increased the restrictiveness of legislation with those of consumers in the remaining states. We find that restricting collection activities leads to a decrease in access to credit and to a deterioration in indicators of financial health. Moreover, our estimated treatment effects are concentrated among the youngest borrowers and those with the lowest credit scores.

In the third chapter, I investigate how changes in interest rates and in access to credit affect the repayment of unsecured consumer loans. I use data from two peer- to-peer lending companies and exploit an exogenous change in the way one of the companies sets interest rates, which led to lower interest rates and a higher probability that a given individual receives a loan. I find the change led to a large increase in default rates and provide evidence that increased credit access is the relevant channel. Moreover, I look at spillover effects on the company’s main competitor to isolate how much of this change in repayment can be attributed to changes in the pool of borrowers, as opposed to changes in the behavior of a given borrower.