David Scharfstein (Harvard Business School) delivering his Keynote Address on 'Dollar Funding and the Lending Behavior of Global Banks.' This keynote address analyzes the role played by European banks in the US loan market, in particular the syndicated loan market. European banks over the past 10 years have aggressively expanded their foothold in the US loan market, relying almost exclusively on wholesale funding provided by US money market funds and other players in the shadow banking...

David Scharfstein (Harvard Business School) delivering his Keynote Address on 'Dollar Funding and the Lending Behavior of Global Banks.' This keynote address analyzes the role played by European banks in the US loan market, in particular the syndicated loan market. European banks over the past 10 years have aggressively expanded their foothold in the US loan market, relying almost exclusively on wholesale funding provided by US money market funds and other players in the shadow banking...

Jarrad Harford (University of Washington) discussing Zhaohui Chen (McIntire School, University of Virginia) on 'How Much Liquidity Insurance Do Credit Lines Provide?'

Jarrad Harford (University of Washington) discussing Zhaohui Chen (McIntire School, University of Virginia) on 'How Much Liquidity Insurance Do Credit Lines Provide?'

Zhaohui Chen (McIntire School, University of Virginia) presenting 'How Much Liquidity Insurance Do Credit Lines Provide?' A substantial literature treats credit lines as a form of committed liquidity insurance. The authors provide evidence that challenges this perspective. Borrowing rates hold for a relatively short period of time and firms that draw on a line of credit face higher interest rates and more stringent contract terms upon renewal than do similar firms that did not draw on credit...

Zhaohui Chen (McIntire School, University of Virginia) presenting 'How Much Liquidity Insurance Do Credit Lines Provide?' A substantial literature treats credit lines as a form of committed liquidity insurance. The authors provide evidence that challenges this perspective. Borrowing rates hold for a relatively short period of time and firms that draw on a line of credit face higher interest rates and more stringent contract terms upon renewal than do similar firms that did not draw on credit...

Gordon Phillips (Marshall School of Business, University of Southern California) discussing Laurent Fresard (Robert H. Smith School, University of Maryland) on 'Competitive Pressure and Financial Policies'

Gordon Phillips (Marshall School of Business, University of Southern California) discussing Laurent Fresard (Robert H. Smith School, University of Maryland) on 'Competitive Pressure and Financial Policies'

Laurent Fresard (Robert H. Smith School, University of Maryland) presenting 'Competitive Pressure and Financial Policies'. This paper examines the impact of increased product market competition on corporate investment and financing decisions. Using reductions in import tariff rates as a source of variation in competitive pressure, the authors find that firms simultaneously reduce capital and R&D investment, increase cash reserves and equity, and decrease debt in response to intensified...

Laurent Fresard (Robert H. Smith School, University of Maryland) presenting 'Competitive Pressure and Financial Policies'. This paper examines the impact of increased product market competition on corporate investment and financing decisions. Using reductions in import tariff rates as a source of variation in competitive pressure, the authors find that firms simultaneously reduce capital and R&D investment, increase cash reserves and equity, and decrease debt in response to intensified...

Erwan Morellec (EPFL Lausanne) discussing Lucian Taylor (Wharton School, University of Pennsylvania) on 'Dynamic Debt Runs: Evidence from a Structural Estimation'

Erwan Morellec (EPFL Lausanne) discussing Lucian Taylor (Wharton School, University of Pennsylvania) on 'Dynamic Debt Runs: Evidence from a Structural Estimation'

Lucian Taylor (Wharton School, University of Pennsylvania) presenting 'Dynamic Debt Runs: Evidence from a Structural Estimation'. This paper uses data from the 2007 asset-backed commercial paper (ABCP) crisis to estimate a dynamic model of debt runs. The model features long-term investment financed with dispersedly held, short-term debt with staggered maturities. Yields change endogenously over time, which introduces dilution risk: lenders demand high yields to compensate them for being...

Lucian Taylor (Wharton School, University of Pennsylvania) presenting 'Dynamic Debt Runs: Evidence from a Structural Estimation'. This paper uses data from the 2007 asset-backed commercial paper (ABCP) crisis to estimate a dynamic model of debt runs. The model features long-term investment financed with dispersedly held, short-term debt with staggered maturities. Yields change endogenously over time, which introduces dilution risk: lenders demand high yields to compensate them for being...

Thomas Gehrig (University of Vienna) discussing Vijay Yerramilli (Bauer College of Business, University of Houston) on 'Lender Moral Hazard and Reputation in Originate-to-Distribute Markets'

Thomas Gehrig (University of Vienna) discussing Vijay Yerramilli (Bauer College of Business, University of Houston) on 'Lender Moral Hazard and Reputation in Originate-to-Distribute Markets'

Vijay Yerramilli (Bauer College of Business, University of Houston) presenting 'Lender Moral Hazard and Reputation in Originate-to-Distribute Markets'. This paper analyzes a dynamic model of originate-to-distribute lending in which a bank with significant liquidity needs makes loans and then sells them in the secondary loan market. There is no uncertainty about the bank's monitoring ability or honesty, but the bank may not have incentives to monitor the loan after it has been sold. The...

Vijay Yerramilli (Bauer College of Business, University of Houston) presenting 'Lender Moral Hazard and Reputation in Originate-to-Distribute Markets'. This paper analyzes a dynamic model of originate-to-distribute lending in which a bank with significant liquidity needs makes loans and then sells them in the secondary loan market. There is no uncertainty about the bank's monitoring ability or honesty, but the bank may not have incentives to monitor the loan after it has been sold. The...

Miguel Ferreira (University Nova of Lisbon) discussing Liu Yang (Anderson School, UCLA) on 'The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets'

Miguel Ferreira (University Nova of Lisbon) discussing Liu Yang (Anderson School, UCLA) on 'The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets'

Liu Yang (Anderson School, UCLA) presenting 'The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets'. The authors estimate the labor market consequences of corporate diversification using worker-firm matched data from the U.S. Census Bureau. The authors find evidence that workers in diversified firms have greater cross-industry mobility. Displaced workers experience significantly smaller losses when they switch jobs or industries internally and when they move to a...

Liu Yang (Anderson School, UCLA) presenting 'The Bright Side of Corporate Diversification: Evidence from Internal Labor Markets'. The authors estimate the labor market consequences of corporate diversification using worker-firm matched data from the U.S. Census Bureau. The authors find evidence that workers in diversified firms have greater cross-industry mobility. Displaced workers experience significantly smaller losses when they switch jobs or industries internally and when they move to a...

Augustin Landier (Toulouse School of Economics) discussing Gregor Matvos (Booth School of Business, University of Chicago) on 'Debt and Creative Destruction: Why is Subsidizing Corporate Debt Optimal?'

Augustin Landier (Toulouse School of Economics) discussing Gregor Matvos (Booth School of Business, University of Chicago) on 'Debt and Creative Destruction: Why is Subsidizing Corporate Debt Optimal?'

Gregor Matvos (Booth School of Business, University of Chicago) presenting 'Debt and Creative Destruction: Why is Subsidizing Corporate Debt Optimal?', a theory that rationalizes the government subsidy to corporate debt financing. Two firms compete for survival in a declining industry in a two dimensional war of attrition, in which one dimension, financing, is endogenous. The conflict of interest between equity-and debt-holders is socially desirable by expediting firm exit. Individual firms...