Working Papers:

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The Rise of Market Financing in Europe: Evidence from New and Small Issuers,  with Olivier Darmouni

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

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Beyond Cash-Flows: What Drives Corporate Bond Valuation?, with Felix Corell and Lira Mota

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Default risk alone does not explain credit spreads of corporate bonds, which are also valued for their convenience services like collateral potential, regulatory capital compliance, and liquidity concerns. This paper uses comprehensive price and holdings data from the euro area corporate bond market to uncover the factors driving corporate bond convenience yields. We observe significant variations in these yields among different investor groups, with banks, insurers, and pension funds typically holding high convenience yield portfolios. Investor composition is important in explaining the cross-section of convenience yields and corporate bond returns. By examining the impact of the ECB's corporate QE programs, we uncover a substantial influence of monetary policy on convenience yields of corporate bonds. Our results underscore the importance of asset-specific services in driving bond valuation and shaping monetary policy effects.

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

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We document the structure of firm-bank relationships across eleven euro area countries and present new stylised facts using data from the Eurosystem credit registry - 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. This is 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 in lower rates, possibly because banks appropriate part of the surplus generated by relationship lending through higher rates.  

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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 exceed 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 76 basis point interest rate premium for large exposures, relative to firms just below the threshold. This premium is more pronounced for small banks and 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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