Economic Narratives and Private Lending DecisionsJOB MARKET PAPER
Dissertation Chair: Robert Davidson
Recent research indicates that investors are swayed by prevailing economic narratives (e.g., Shiller, 2019; Bybee, Kelly, Su, & Ramadorai, 2023), yet it is not obvious whether creditors should be similarly swayed by these narratives. Creditors have access to both firm-specific and aggregated private information across their various business lines (Boot, 2000), which gives them an information advantage over typical arms’ length investors. This project examines whether creditors, like equity investors, are influenced by prevailing economic narratives in the context of private lending decisions. Specifically, I take advantage of new advanced capabilities in artificial intelligence and open-source language models (OSLMs) to examine whether alignment of firm-specific media narratives with popular economic narratives influences credit decision-making.
The Importance of Lender-Auditor Relationships in Private LendingWIP
with Andrew Acito
Prior literature has established that banks rely on lending relationships to minimize information asymmetry between lenders and borrowers. New research, relying on institutional-level analysis, finds that banks achieve similar benefits from sharing a common auditor with borrowers either because of the banks familiarity with the auditor’s testing procedures or because the auditor’s relationship with the bank creates stronger incentives to perform well on the borrower’s audit (Francis & Wang, 2020). This work, however, raises broader questions about how relationships between bankers and auditors affect lending decisions. This paper examines whether prior personal relationships between lenders and borrowers’ auditors can influence loan syndicate formation and debt contract design.
Political Polarization, Executives’ Decision-making, and Firm-level Outcomes2ND YEAR PAPER
with Robert Davidson
Given the adverse effect of growing political polarization, we explore whether politically heterogeneous management teams can effectively work together and carry out firm objectives. Specifically, we examine whether political similarity among firms’ top executives impacts the probability of executive turnover and broad measures of firm performance. We find that politically similar management teams are less likely to experience executive turnover. We also find that politically similar management teams have less turnover during periods when the broader political environment is highly polarized.
