1. Creditors’ Rights, Threat of Liquidation, and the Labor and Capital Choices of Firms (2022), co-authored with Shashwat Alok and Ritam Chaurey, Journal of Law and Economics, 65(4), 687-714.
Abstract: In 2002, India introduced a legal reform that allowed secured creditors to seize and liquidate a defaulter’s assets, thereby strengthening creditors’ rights. We study the impact of the legal change on firms’ real decisions regarding their cap- ital and labor, exploiting variation in their prepolicy proportion of collateraliz- able assets. We find that firms increased employment and reduced their capital investments. These effects are especially strong for firms in regions with less- efficient courts. Our results are consistent with an increased threat of liquidation for firms following the passage of the law.
Featured in: Oxford Business Law Blog (OBLB)
2. Corporate Dividend Policy, co-authored with Mark Leary, Handbook of Corporate Finance (edited by David J Denis), 2024.
Abstract: We survey the empirical literature on corporate dividend policy, with emphasis on developments over the last two decades. We divide our review into two parts. We first summarize what we “know” about dividend policy – the set of observations about the nature of (and trends in) dividend policies that are largely agreed upon in the literature. In the second part, we focus on the unresolved question of why dividends matter, particularly on areas of disagreement, such as the channels through which dividends impact firm value. Payout policy can alter a firm’s market value by affecting its future cash flows or its cost of capital (in which case it impacts intrinsic value) or by signaling value-relevant information to investors (affecting only the timing of when that value is reflected in market prices). We organize the survey around these three possibilities, highlighting relevant empirical evidence and areas of remaining uncertainty.
3. Buy Now, Pay Later and Purchase-level underwriting (under revision)
Presented at: Virginia Tech (2024), Indian School of Business (2024), Centre for Advanced Financial Research and Learning (CAFRAL), India (2024), Chicago Booth Rising Scholars (2022)
Abstract: This paper examines the value and impact of using purchase-level information, specifically its role in alleviating the information asymmetry in the credit markets. Using a proprietary lending dataset from a firm operating in the BNPL industry, I evaluate the underwriting practices of the lender and document three findings - i) the lender's internal score predicts the likelihood of a loan defaulting with 18% greater accuracy than traditional credit score, ii) the lender's internal score incorporates purchase-level information, and iii) the lender prices a significant portion of loans using purchase-level information. I find that a model that includes purchase-level information can lend 33 percentage points more in loan count, increasing financial inclusion without having a negative effect on the default rate and also generating higher returns for the lender. Similarly, a model that includes purchase-level information reduces default by 3 percentage points. Leveraging a randomized experiment conducted by the lender and discontinuity in lender pricing, I find that a 10 percentage point increase in offered interest rate decreases applicant take-up by 14.25 percentage points with no significant impact on the loan performance.
4. Who Buys Cryptos during Uncertain Times?, with Prachi Deuskar and Vasundhara Sharma
Abstract: Global economic policy uncertainty (GEPU) is associated with greater volume but lower volatility in cryptocurrencies. It predicts positive blockchain news sentiment and higher crypto returns for up to six months. The results are opposite to those for traditional assets like equities, bonds, and fiat currencies, which become more volatile and lose value with greater policy uncertainty. The results could potentially be explained by reallocation from traditional assets to cryptos. Greater GEPU is followed by Bitcoin buying by large traders. On the other hand, small traders are net sellers, consistent with a rise in risk aversion, resulting in them shunning risky assets.
5. The Role of Fintech in Government-Guaranteed Loan Lending with Shashwat Alok and Pulak Ghosh
6. Firm response to greater creditor protection.