I have been an assistant professor at the University of California, Berkeley since graduation from the Finance Ph.D. program at the University of Chicago in 2008. My research spans dynamic contracting, international finance, and financial intermediation. My most recent work on financial intermediation analyzes the interplay between financial regulation and risk-taking incentives in the financial sector. The corresponding papers are published in top general interest journals (Econometrica) and leading field journals such as the Journal of Economic Theory, the Journal of Financial Economics and the Journal of International Economics. My favorite papers are “Impatience versus incentives,” “Markup cycles, dynamic misallocation, and amplification," and ''Rating agencies in the face of regulation.'' I will serve as a board member of the Finance Theory Group starting Fall 2016. I have achieved teaching excellence at Berkeley Haas (Median score ≥ 6 / 7) in every section since 2010 across a variety of degree programs (undergraduate, M.B.A. and Ph.D.).
"On the value of breadth in academic research'' See p. 2 of article by my advisor Raghu Rajan
(7) "Target Revaluation after Failed Takeover Attempts - Cash versus Stock," 2016, joint with Ulrike Malmendier and Farzad Saidi, Journal of Financial Economics, 119, 92-106. Online Appendix
Main insight: Capital markets interpret a cash offer as a economically large and positive signal about the fundamental value of target resources (in contrast to a stock offer). We expose a significant look-ahead bias affecting the previous literature on this topic.
Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.
(5) “Markup cycles, dynamic misallocation, and amplification," 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
agencies in the face of regulation,'' 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61.
risk and technology,'' 2012, Journal of Financial Economics, 103, 113-129.
(2) "Tariff wars in a Ricardian model
with a continuum of goods," 2010, Journal of International
Economics, 80, 212-225.
(1) "Rybczynski's theorem in the
Heckscher-Ohlin world - anything goes," 2009, joint with Hugo
Sonnenschein & Christis Tombazos, Journal of International Economics, 79, 137-142.
Abstract: The timing of compensation in the financial sector has received intense attention in the aftermath of the financial crisis, as bonus payments to key risk-takers in the financial sector have been paid out before the realization of disastrous outcomes. To shed light on this issue, we develop a parsimonious principal-agent framework, and analyze the optimal timing and contingency of deferred compensation if the agent’s action has persistent effects. For general information processes, optimal deferral times depend on the trade-off between the cost of agent impatience and the benefit of more informative performance signals. We apply this framework to the financial sector, in particular to cases in which the action of the agent, such as a bank CEO, affects the arrival-time distribution of bank failure. In equilibrium, compensation contracts with “short-term” payout dates can reflect lower risk-taking incentives (and hence less frequent bank failures) than contracts with “long-term” payouts. Regulatory interference in the timing of optimal compensation contracts, such as a mandated minimum-deferral requirement, can increase risk-taking. However, this can be mitigated if deferral requirements are coupled with restrictions on the contingency of bonus payments; in other words, through clawback provisions.
(9) “Paper on bank capital regulation, risk-taking, and borrower heterogeneity (Title TBD),” September 2015, joint with Milton Harris and Christian Opp, Presentation Slides.
See Video for intuition of graphical illustration of main results.
Abstract: Our paper argues that recognizing firm heterogeneity is key to understanding the system-wide implications of bank capital requirements on credit supply and bank risk-taking. We propose a framework that can flexibly account for a cross-section of borrowers that differ along investment opportunities, regulatory risk signals, and their dependence on bank finance. Banks can serve a socially beneficial role by financing borrowers that are credit rationed by public capital markets, but their access to public guarantees creates socially undesirable risk-shifting incentives. In line with recent empirical evidence from Europe, our model predicts that banks endogenously specialize in financing different segments of the borrower distribution to optimally exploit such guarantees. Increases in system-wide capital requirements may lower banks' incentives to engage in excessive risk taking but may also reduce credit extended to bank-dependent firms that are relatively safe. The associated net effects on financial stability and allocative efficiency depend on the cross-sectional distribution of firms, in particular, firms' ability to access public markets and regulators' ability to discern bank dependence.
Work in progress:
(10) “Regulatory reform and risk-taking: replacing ratings,” September 2014, joint with Bo Becker, Presentation slides. (major update soon, new data!)
Abstract: We expose that a reform of capital regulation for insurance companies in 2009/2010 eliminated (to a first-order approximation) capital requirements for holdings of non-agency mortgage backed securities. Post reform, insurance companies allocate 54% of their purchases of new MBS issues toward non-investment grade assets (as opposed to 6% pre reform), a large increase in risk-taking.