I am an assistant professor in the Department of Finance at the CUHK Business School. I recently received my PhD in economics from MIT. I am interested in how financial frictions and liquidity provision affect firms’ real decisions, with an emphasis on credit supply channels and intermediary behavior. I have a particular interest in environmental settings.

Research

Corporate Liquidity Supply from Non-Bank Intermediaries and the Real Effects of Factoring

with Victor Orestes and Thiago Silva   PDF

Selected presentations: Finance Down Under, BU, MFA, Spring Finance Workshop, FIRS, Lake District Workshop, CEBRA. Upcoming: EEA, IBEFA.

Abstract: We show that short-term fluctuations in firms’ ability to convert trade credit receivables into liquidity through factoring have large and persistent real effects, with limited substitution from other financing sources or adjustments in trade credit terms. In Brazil, specialized non-bank intermediaries (FIDCs) securitize receivables and are key providers of working capital financing. Using novel transaction-level data linking factoring, invoices, payments, credit operations, and employment records, we exploit investor inflows to FIDCs in a shift-share design to identify exogenous variation in factoring supply. A one-percentage-point decline in factoring rates increases factoring volumes by 16%, revenues by 6%, and intermediate input expenditure by 4%, with effects persisting for several months. Firms expand permanent employment and demand less temporary labor. A model of corporate liquidity management rationalizes these findings: factoring endogenously transforms production into collateral, tying firms’ real and financial decisions. Model-implied macro-elasticities indicate that lowering economy-wide factoring spreads by 1 percentage point would raise aggregate output and wages by 0.3 to 0.5 percentage points.

Volatility and Under-Insurance in Economies with Limited Pledgeability: Evidence from a Frost Shock

with Victor Orestes and Thiago Silva   PDF

Selected presentations: LSE Environment Camp, CEBRA, AsianFA.

Abstract: We use transaction-level data on payments, credit, and insurance to examine how Brazilian farmers responded to the severe frost of July 2021, a shock that affected coffee, a perennial crop whose plants constitute a major component of farm value. The frost reduced output and damaged the productive capital that supports both future harvests and land values. We find that insured farmers increased investment in the years following the shock, while uninsured farmers reduced investment and borrowing. We develop a general equilibrium model with limited commitment where borrowing can be backed by future harvest revenue (CPR) and by land. A frost reduces output and collateral, but the resulting increase in coffee prices raises the value of surviving harvest and grove collateral. The change in borrowing capacity therefore depends on which asset the farmer pledges. In the fixed-price CPR benchmark, model-generated event studies show that uninsured farmers reduce debt and investment after a capital shock, while insured farmers borrow and invest to replace damaged capital. Our empirical event studies on farmers’ responses to the frost shock validate the model’s predictions. We show how limited pledgeability can explain why constrained farmers neither purchase insurance before a shock nor fully rebuild afterward, and why emergency credit subject to the same collateral constraint may be a poor substitute for insurance. We use the model to discuss policies that increase CPR and land pledgeability and to show why climate stress tests should measure risk borne by farmers, suppliers, and consumers in addition to direct financial-sector losses.

Aggregate Impacts of Command-and-Control Environmental Policy: Evidence from Court-Ordered Mining Bans in India

with Ananya Kotia and Utkarsh Saxena  

Abstract: We estimate the aggregate impacts of court-ordered iron ore mining bans in India and consider the counterfactual welfare gains from an alternative policy to the ban. The local sectoral ban is a command-and-control (CAC) policy that is commonly applied to natural resource settings, usually when the regulator has a signal of widespread non-compliance. The Supreme Court of India imposed bans on iron ore mining and outbound iron ore trade in two states in response to reports that mines operated under fake environmental permits and underpaid mining royalties. Using firm-level industrial survey data, mine-level output data, and bilateral mine-to-firm auction data, we decompose the bans’ effects into trade, production networks, and local labor demand channels. Our results indicate persistent declines in employment, capital stock, and borrowing by iron-consuming plants, despite the temporary duration of the ban. These findings highlight the economic spillovers caused by CAC policies, especially in industries that are upstream in the supply chain.

Market Design, Forward Guidance, and Investment Decisions in a Carbon Credit Market

with Luis Alvarez, Victor Orestes, and Thiago Silva

Selected presentations: VU Amsterdam, SKEMA.

Abstract: We study Brazil’s CBIO program, a standardized over-the-counter carbon credit market in which fuel distributors must retire credits generated by certified biofuel output under advance-announced compliance targets. We show several facts contrasting this supply chain oriented carbon credit market with large emissions trading systems: holdings and trading behavior are strategic, heterogeneous, and shaped by financial constraints. We use transaction-level data on CBIO issuance, trading, retirements, and obligations with microdata on firms’ borrowing, payments, production, and investment to examine how policy changes and fuel-market shocks affect prices, inventories, and firms’ decisions. We develop a model in which carbon credits are state-contingent claims on future compliance scarcity, producers face financing frictions, intermediaries manage inventories under arbitrage limits, and policymakers face a time-consistency problem. The framework clarifies why a carbon credit market generally has different outcomes from a carbon tax with the same expected transfers: carbon credit prices affect both the relative price of fuels and the liquidity/pledgeability of producer cash flows. We use the data and model to quantify how forward guidance and intermediation in the carbon credit market affect price volatility, green investment, and supply-chain spillovers.