Research

“Monetary Policy and the Currency of Corporate Debt” (Job-Market Paper)
(Internet Appendix)

Research on cross-border transmission of monetary policy focuses overwhelmingly on the role of financial institutions as capital suppliers. I argue that nonfinancial firms, as capital demanders, are also important. In a large international sample, firms rebalance their debt away from (toward) currencies where monetary policy rates rise (fall). This behavior is more prominent when debt-market frictions are low and firm financial flexibility is high. Long-term debt and bank debt are especially sensitive to rebalancing. Finally, declines in foreign policy rates boost investment for the firms most able to borrow in foreign markets.

“Big Business, Local Finance”

U.S. banks and nonfinancials have both grown larger and fewer. Studies find that bank industrial organization helps structure nonfinancial industries via the credit supply, but this paper shows that causality also runs the other way. I exploit plausible exogeneity in Walmart’s historical expansion to study the impact on banks of changes in local firms’ demand for bank credit. After Walmart enters a market, it replaces local establishments but not their local borrowing. Local banks expand real estate lending, reduce business and agricultural lending, and become more likely acquisition targets. Surviving banks grow larger, while local bank branch intensity declines.

“Industrial Dispersion and Bank Market Structure”

Many studies describe the real effects of bank market structure, but fewer describe the determinants of bank market structure. I model a bank in an adverse selection setting where soft information is important and where banks develop industry-specific expertise. In this model, the shape of the distribution of borrowers across industry is of first-order importance. The model predicts that areas where borrowers are concentrated into just a few industries have higher small-bank market share, higher bank profitability, lower probability of bank exit through acquisition or failure, and more concentrated local banking markets. Empirical results are consistent with the model’s predictions.