RESEARCH

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

In a large international sample, firms adjust the currency structure of their debt away from (toward) currencies where monetary policy rates rise (fall). I provide insight into why this theoretically unprofitable behavior is observed–namely, that nonfinancial firms have higher discount rates than large financial firms and that falling foreign interest rates makes one type of hedging less costly. I also find that firms adjust the currency structure of their debt more when they have better access to foreign capital markets and more financial flexibility. Finally, evidence suggests that monetary loosening in one country may stimulate corporate investment in other countries.

“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.