Research Interests

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(with K. John, NYU-Stern School of Business, S. Bonini & S. Banerjee, Stevens Institute of Technology)

In this paper, we show that heterogeneous demand for insurance is causally related to the structure of bond ownership. In particular, the number of investors holding the underlying bond (breadth) and the  concentration of ownership ( depth) affect the demand for CDS. Our results support a renegotiation risk hypothesis suggesting that fragmented ownership hampers the bondholders ability to renegotiate in distress due to excessive coordination costs which leads to increased demand for external insurance. We perform multiple endogeneity tests to support causality including lead-lag regressions, border discontinuity and using the Big-Bang protocol as an exogenous shock to the cost of insurance. Our novel evidence carries important normative implications in the regulation of CDS markets and the design of bond securities. 

(with Stefano Bonini, Stevens Institute of Technology and Shuang Wu, Sacred Heart University)  

We model the firm’s objective as a function of output and environmental ethics. The cost of emission increases with production and is weighted by firms’ environmental ethics, leading firms to endogenize the optimal emission-output level. Firms with higher environmental ethics have higher marginal output and emit less because of the higher emission cost. More importantly, we argue that the one-size-fits-all carbon pricing is not optimal. Instead, carbon emissions should be priced based on the efficiency of the emission. Given a fixed carbon cap, switching to efficiency-based carbon pricing increases social welfare. Using emission data from 1995 to 2020, we provide empirical evidence to support the theory. 

(with Stefano Bonini, Stevens Institute of Technology)  

In this paper, we propose that CEO power is a driving force for CEO dismissal. A powerful CEO is capable of extracting value from lenders by negotiating weaker covenants in loan contracts. However, this leads to higher risk taking and results in a higher likelihood of the CEO being fired. Using a novel dataset of consistently identified CEO succession events, we show CEO firing to be correlated with weaker lender protection that recovers after CEO dismissal. The economically significant negative relation between the entrenchment index (proxy for CEO power) and covenant strictness further supports our theory that value transfer from creditors due to CEO power has the flip side of increasing the probability of CEO dismissal. We confirm our results using a propensity score matched (PSM) control sample of non-dismissal succession events. Controlling for a number of covariates for CEO, firm and loan characteristics, we find our results to be robust and consistent.