Academic Appointments

The University of Chicago Booth School of Business

2024— Professor of Finance and Entrepreneurship

2022—2024 Associate Professor of Finance and MV Advisors Faculty Fellow

2018—2022 Assistant Professor of Finance, Liew Family Junior Faculty Fellow, and Fama Faculty Fellow

Harvard Business School

2023—2024 Visiting Associate Professor of Business Administration (Entrepreneurial Management Unit)

Working Papers

Startups in Africa (with Marcio Cruz, Mariana Pereira-Lopez, Tommaso Porzio, and Chun Zhao) [Coming soon]

Politics at Work (with Valdemar Pinho Neto and Edoardo Teso) [Revise and Resubmit at the American Economic Review]

[+] Abstract

We study how individual political views shape firm behavior and labor market outcomes using new micro-data from Brazil. We first show that business owners are considerably more likely to employ copartisan workers. This phenomenon is in part driven by the overlapping of political and social networks. Multiple tests—surveys, event studies, analyses of wage premia and promotions within the firm, and a field experiment—further highlight how business owners’ political preferences directly influence firms’ employment decisions. A channel of political discrimination appears more relevant than one of political quid-pro-quo between firms and politicians.

Polarizing Corporations: Does Talent Flow to “Good’’ Firms? (with Tim McQuade, Gabriel Ramos, Thomas Rauter, and Olivia Xiong) [Supplementary Appendix]

[+] Abstract

We conduct a field experiment in partnership with the largest job platform in Brazil to study how environmental, social, and governance (ESG) practices of firms affect talent allocation. We find both an average job-seeker’s preference for ESG and a large degree of heterogeneity across socioeconomic groups, with the strongest preference displayed by highly educated, white, and politically liberal individuals. We combine our experimental estimates with administrative matched employer-employee microdata and estimate an equilibrium model of the labor market. Counterfactual analyses suggest ESG practices increase total economic output and worker welfare, while increasing the wage gap between skilled and unskilled workers.

Do Information Frictions and Corruption Perceptions Kill Competition? A Field Experiment On Public Procurement in Uganda (with Francesco Loiacono, Edwin Muhumuza, and Edoardo Teso)

[+] Abstract

We study whether information frictions and corruption perceptions deter firms from doing business with the government. We conduct two randomized controlled trials (RCTs) in collaboration with the public procurement and anti-corruption agency in Uganda. The first RCT provides firms with direct and timely access to information about government tenders over a two-year period. The second RCT provides firms with access to structured information on anti-corruption audits and on other firms’ perceptions about public entities’ integrity. We find that increasing information on available procurement opportunities alone does not increase firm participation in public procurement. However, addressing firms’ misperceptions about the integrity of public entities increases firms’ total number of bids and total government contracts won. Our findings point to the limits of transparency reforms that aim to increase competition in public procurement without accounting for firms’ perceptions about government corruption and inefficiency.

Life After Death: A Field Experiment with Small Businesses on Information Frictions, Stigma, and Bankruptcy (with Shai Bernstein, Mitch Hoffman, and Benjamin Iverson) [Revise and Resubmit at the Journal of Finance]

[+] Abstract

In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11, where debts are renegotiated so that the business can continue operating. Firms also exhibit bankruptcy-related stigma, believing that bankruptcy is embarrassing, a sign of failure, and a negative signal to employees and customers. Short educational videos that address information or stigma increase knowledge and decrease stigma, both immediately and durably over 4 months. Videos increase reported interest in using Chapter 11 bankruptcy and increase intended debt and investment. However, we do not observe long-term real effects. Three years after the main RCT, we replicate our experiment on a totally different sample of larger firms, all of whom face substantial debt, and obtain the same results. A survey of bankruptcy attorneys and judges points to entrepreneurs’ overconfidence and, to a lesser extent, excessive perceived legal fees as first-order frictions explaining the limited real impact of treatments that only address information and stigma.

[Control Video] [Information Video] [Information+Stigma Video]

Publications

Selfish Corporations (with Niels Gormsen and Tim McQuade) [Review of Economic Studies, 91, No. 3, May 2024: 1498-1536] [Online Appendix]

[+] Abstract

We study how perceptions of corporate responsibility influence policy preferences and the effectiveness of corporate communication when agents have imperfect memory recall. Using a new large-scale survey of U.S. citizens on their support for corporate bailouts, we first establish that the public demands corporations to behave better within society, a sentiment we label “big business discontent.” Using random variation in the order of survey sections and in the exposure to animated videos, we then show that priming respondents to think about corporate responsibility lowers the support for bailouts. This finding suggests that big business discontent influences policy preferences. Furthermore, we find that messages which paint a positive picture of corporate responsibility can “backfire,” as doing so brings attention to an aspect on which the public has negative views. In contrast, reframing corporate bailouts in terms of economic trade-offs increases support for the policy. We develop a memory-based model of decision-making and communication to rationalize these findings.

[Control Video] [T-Economy Video] [T-Bad Video] [T-Good Video]

Investing with the Government: A Field Experiment in China (with Bo Li and Ernest Liu) [Journal of Political Economy, 132, No. 1, January 2024: 248-294] [Online Appendix]

[+] Abstract

We conduct a large-scale, nondeceptive field experiment to elicit preferences for government participation in China’s venture capital and private equity market. Our main result is that the average firm dislikes investors with government ties. We show that such dislike is not present with government-owned firms and that this dislike is highest with best-performing firms. Additional results and surveys suggest that political interference in decision-making is the leading reason why government investors are unattractive to private firms. Overall, our findings point to the limits of a model of “state capitalism” that strongly relies on the complementarity between private firms and government capital to drive high-growth entrepreneurship and innovation.

Revealing Corruption: Firm and Worker Level Evidence from Brazil (with Spyridon Lagaras, Jacopo Ponticelli, Mounu Prem and Margarita Tsoutsoura) [Journal of Financial Economics, 143, No. 3, March 2022: 1097-1119] [Online Appendix]

[+] Abstract

We study how the disclosure of corrupt practices affects the growth of firms involved in illegal interactions with the government using randomized audits of public procurement in Brazil. On average, firms exposed by the anti-corruption program grow larger after the audits, despite experiencing a decrease in procurement contracts. We manually collect new data on the details of thousands of corruption cases, through which we uncover a large heterogeneity in our firm-level effects depending on the degree of involvement in corruption. Using investment-, loan-, and worker- level data, we show that the average exposed firms adapt to the loss of government contracts by changing their investment strategy. They increase capital investment and borrow more to finance such investment, while there is no change in their internal organization. We provide qualitative support to our results by conducting new face-to-face surveys with business owners of government-dependent firms.

Corruption and Firms (with Mounu Prem) [Review of Economic Studies, 89, No. 2, March 2022: 695-732] [Online Appendix]

[+] Abstract

We estimate the causal real economic effects of a randomized anti-corruption crackdown on local governments in Brazil using rich micro-data on corruption and firms. After anti-corruption audits, municipalities experience an increase in the number of firms concentrated in sectors most dependent on government relationships. Through the estimation of geographic spillovers and additional tests, we show that audits operate via both a direct detection effect as well as through indirect deterrence channels. Politically connected firms suffer after the audits. Our estimates indicate the anti-corruption program generates significant local multipliers which are consistent with the presence of a large corruption tax on government-dependent firms.

Who Creates New Firms When Local Opportunities Arise? (with Shai Bernstein, Davide Malacrino, and Tim McQuade) [Journal of Financial Economics, 143, No. 1, January 2022: 107-130] [Online Appendix]

[+] Abstract

We examine the characteristics of the individuals who become entrepreneurs when local opportunities arise. We identify local demand shocks by linking fluctuations in global commodity prices to municipality-level agricultural endowments in Brazil. We find that the firm creation response is mostly driven by young and skilled individuals. The characteristics of these responsive entrepreneurs are significantly different from those of average entrepreneurs in the economy. By structurally estimating a novel two-sector model of a local economy, we highlight how the demographic composition of the local population can significantly affect the entrepreneurial responsiveness of the economy.

Patronage and Selection in Public Sector Organizations (with Mounu Prem and Edoardo Teso) [American Economic Review, 110, No. 10, October 2020: 3071-99] [Online Appendix]

[+] Abstract

In all modern bureaucracies, politicians retain some discretion in public employment decisions, which may lead to frictions in the selection process if political connections substitute for individual competence. Relying on detailed matched employer-employee data on the universe of public employees in Brazil over 1997–2014, and on a regression discontinuity design in close electoral races, we establish three main findings. First, political connections are a key and quantitatively large determinant of employment in public organizations, for both bureaucrats and frontline providers. Second, patronage is an important mechanism behind this result. Third, political considerations lead to the selection of less competent individuals.

Bankruptcy Spillovers (with Shai Bernstein, Xavier Giroud, and Benjamin Iverson) [Journal of Financial Economics, 133, No. 3, September 2019: 608-633] [Online Appendix]

[+] Abstract

How do different bankruptcy approaches affect the local economy? Using US Census microdata, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. The spillover effects are highly localized and concentrate in nontradable and service sectors, consistent with a reduction in local consumer traffic and a decline in knowledge spillovers between firms. The evidence highlights the externalities that bankruptcy design can impose on nonbankrupt firms.

Asset Allocation in Bankruptcy (with Shai Bernstein and Benjamin Iverson) [Journal of Finance, Lead Article, 74, No. 1, February 2019: 5-53] [Online Appendix]

[+] Abstract

This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy and employment at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to an inefficient allocation of assets in bankruptcy.

Short Papers and Book Chapters

What Predicts Corruption? (with Mounu Prem and Jorge Gallego) [A Modern Guide to the Economics of Crime, Forthcoming, Eds P. Buonanno, P. Vanin, and J. F. Vargas]

Construction and Public Procurement in Uganda (with Nicole Ntungire) [Mining for Change: Natural Resources and Industry in Africa, March 2020, Oxford University Press, Eds J. Page and F. Tarp ]

A Cross-Country Comparison of Dynamics in the Large Firm Wage Premium (with Joacim Tag, Michael Webb, and Stefanie Wolter) [AEA: Papers and Proceedings, May 2018: 108: 323–27]