Publications:

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Firm-bank relationships: A cross-country comparison, with Kamelia Kosekova, Angela Maddaloni, and Fabiano Schivardi​

Review of Corporate Finance Studies, Forthcoming. 

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We document the structure of firm-bank relationships for the 11 largest countries in the euro area countries and present new stylized facts using data from AnaCredit. We look at the number of banking relationships, reliance on the main bank, credit instruments, loan maturity, and interest rates. Firms in southern Europe borrow from more banks and obtain a lower share of credit from the main bank than those in northern Europe. They also tend to borrow more on short-term, more expensive instruments and to obtain loans with shorter maturity. The findings are consistent with the hypothesis that firms in southern Europe rely less on relationship banking and obtain credit less conducive to firm growth, in line with their smaller average size. Relationship lending does not translate into lower rates, possibly because banks appropriate part of the surplus generated by
relationship lending through higher rates. Finally, assortative matching, according to which small banks specialize in supplying credit to small firms, is stronger in northern European countries.

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Working Papers:

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Non-Bank Lending to Mid-Size Firms in Europe: Evidence from Corporate Securities,  with Olivier Darmouni

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Using newly available micro-data, this paper documents new evidence on the rise of non-bank credit to mid-size firms in the euro area. Recent new issuers of debt securities are typically small, private, and unrated. Their spreads are comparable to high-yield bonds. Traditional "buy-and-hold''  investors are small for unrated and smaller issuers, while non-bank intermediaries are large. These non-bank intermediaries were however as stabilizing as insurers during the March 2020 turmoil. Nevertheless, the subsequent bond issuance wave was restricted to large and rated firms. This market thus more closely resembles "private debt'' markets than the traditional bond market.

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Learning about Convenience Yield from Holdings, with Felix Corell and Lira Mota

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Investors value financial assets for both cash flows and services like liquidity and regulatory benefits. The value of these services is typically measured as a convenience yield — the yield spread between assets with similar cash flows. However, convenience yields are residual measures that reveal little about the underlying drivers of this price gap. Using comprehensive bond characteristics and portfolio holdings data on corporate and sovereign bonds in the euro area, we decompose EU AAA sovereign bond convenience yields into liquidity, duration, regulatory capital, and collateral components. Our findings show that over the past decade, this yield has been primarily driven by insurance companies' and pension funds' preference for bonds with low regulatory capital requirements. Policy-induced shocks to these services significantly impact asset prices and portfolio allocations. These results highlight the importance of asset-specific service flows in bond valuation and monetary policy transmission.

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How unconventional is green monetary policy?,  with Monika Piazzesi and Martin Schneider

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This paper studies the environmental impact of unconventional monetary policy. Our theoretical framework is a multisector growth model with climate externalities and financial frictions. When central bank asset purchases have real effects on aggregate output, their sectoral composition typically affects the climate. Market neutrality of asset purchases does not follow from simple formulas used by policy makers, but depends on (i) the impact of central bank purchases on firms’ cost of capital and (ii) the share of capital funded by bonds. We use micro data on bond holdings, firm characteristics and emissions to show that the ECB’s corporate bond portfolio is tilted towards brown sectors relative to a market portfolio of sectoral capital stocks.​​​

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Borrowing Beyond Bounds: How Banks Pass on Regulatory Compliance Costs, with Felix Corell 

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Banks in the euro area must inform supervisors about each exposure that exceeds 10% of the bank's capital. Using a granular dataset that combines banks' loan and security portfolios, we test whether banks pass on the cost of complying with the large-exposure framework to borrowers above the threshold. We show that after a decrease in the reporting threshold, small banks react by shifting more exposures just below the threshold. In addition, banks charge a sizable 74 basis point interest rate premium for large exposures, relative to firms just below the threshold. This premium is more pronounced for small banks and unrated borrowers with fewer banking relationships and hence fewer outside options. In response, when firms approach their bank's large exposure threshold, they become more likely to borrow from other banks. Despite the "large-exposure penalty", we find no statistical evidence for bunching below the threshold, suggesting that there are substantial frictions that prevent firms from switching to better-capitalized banks to reduce interest expenses.

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Lending Relationships in Loan Renegotiation: Evidence from Corporate Loans

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Winner of 2017 WFA-CFAR Best Finance PhD Paper Award  

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This paper presents evidence that personal relationships between corporate borrowers and bank loan officers improve the outcomes of loan renegotiation. Analysing a bank reorganization in Greece in the mid-2010s, I find that firms that experience an exogenous interruption in their loan officer relationship confront three consequences: one, the firms are less likely to renegotiate their loans; two, conditional on renegotiation, the firms are given tougher loan terms; and three, the firms are more likely to alter their capital structure. These results point to the importance of lending relationships in mitigating the cost of distress for borrowers in loan renegotiations.

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Securing the Unsecured: How do stronger creditor rights impact firms?

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This paper identifies the impact of stronger creditor rights on firms' financing as well as on local economic development. The passage of an enforcement on cash assets reform in Croatia benefited mostly the unsecured creditors, as it made safer the collection of unsecured debt. Using a novel dataset on courts' efficiency and identifying geographical and sectoral variation on the exposure to the reform, I find that firms receive higher levels of trade credit and short term loans when the enforcement of creditor rights is stronger. Moreover, it is shown that such reforms could cause a distortion on firms' cash management, profitability, and investment. Lastly, more firms are incorporated in cities that have a higher exposure to the reform and the local level of employment and of investment is higher in those cities. These results provide evidence that a stronger enforcement of creditor rights decreases the barriers to entry for firms both at the extensive and at the intensive margin but at the same time it distorts the way that pre-existing firms operate.

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