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 have achieved Haas teaching excellence (Median score ≥ 6 / 7) in every section since 2010 across a variety of degree programs (undergraduate, M.B.A. and Ph.D.).
Publications and forthcoming papers:
(7) "Target Revaluation after Failed Takeover Attempts - Cash versus Stock," 2015, joint with Ulrike Malmendier and Farzad Saidi, forthcoming, Journal of Financial Economics.
Main insight: Capital markets interpret a cash offer as a positive signal about the true value of target resources. 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.
(8) “The system-wide effects of bank capital regulation on credit supply and risk-taking,” September 2015, joint with Milton Harris and Christian Opp, Presentation Slides. (major update soon)
Abstract: We propose a tractable framework to examine the system-wide effects of bank capital requirements. In our model, banks can serve a socially beneficial role by financing firms that are credit rationed by public markets, but banks' access to deposit insurance (or implicit guarantees) creates socially undesirable risk-shifting incentives. Equity ratio requirements reduce banks' risk-taking incentives, but may also constrain banks' balance sheets. When existing bank capital is sufficiently high, increases in equity-ratio requirements unambiguously improve welfare and the stability of the banking system. However, when bank capital is scarce, increased equity-ratio requirements induce credit rationing of both bank-dependent firms with positive NPV projects and risky firms with negative NPV. In this case, the net effects on welfare and the risk-taking of banks are ambiguous, as they depend on which type of credit rationing dominates. Our model provides conceptual guidance on the cyclicality of optimum capital requirements as well as their dependence on the development of public markets and the cross-sectional distribution of firms.
(9) “Regulatory reform and risk-taking: replacing ratings,” September 2014, joint with Bo Becker, Presentation slides. (major update soon)
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.
Work in progress:
(10) “Clawback provisions and risk-taking,” joint with Florian Hoffmann and Roman Inderst, Presentation slides. (major update soon)
Abstract: We develop a framework to evaluate the effects of recent regulation introducing mandatory clawback provisions in compensation contracts of key risk-takers of financial institutions. In our moral hazard setup, the agent’s effort has persistent effects by controlling the arrival time distribution of a disaster event. The optimal payout times in compensation contracts trade off more precise information about agent effort, as measured by the likelihood ratio, against the cost of delay resulting from agent impatience. Since the principal does not bear the full social cost of the disaster due to limited liability the regulator aims to reduce excessive disaster risk via clawback clauses. We show that the effect of such regulation on risk-taking depends on whether the principal is able to adjust the total size of the agent's compensation package by the agent. If competition for agents is high, the agent's total pay is fixed by his outside option, and regulation has indeed the intended effect of lowering risk-taking. If this is not the case, regulatory intervention in the timing of pay induces the principal to adjust the level of pay, which may be result in an increase in risk-taking. We derive precise conditions on the information arrival process that determines when such backfiring occurs.
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