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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

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 nor adjustments in trade credit terms. In Brazil, specialized non-bank intermediaries (FIDCs) securitize receivables and are key providers of working-capital liquidity. Using novel transaction-level data linking all factoring and credit operations, invoices, payments, 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 temporarily demand less temporary labor. A model of corporate liquidity management rationalizes these findings: factoring endogenously transforms production into collateral, tying firms’ real and financial marginal decisions in a self-reinforcing liquidity-productivity loop. 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 the Frost Shock

with Victor Orestes and Thiago Silva   PDF

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 are a major component of farm value. The frost shock reduced both output and the pledgeable value of farmers’ collateral. We find that insured farmers increased investment in the years following the shock, while uninsured farmers reduced investment and borrowing. We show how this pattern is consistent with models of imperfect pledgeability of a firm’s collateral, where constrained firms neither insure (ex-ante) nor fully recover from a shock (ex-post). Limited commitment endogenously generates under-insurance through the combination of upfront payment of the insurance premium with the tightening of borrowing constraints post-shock due to the decrease in total collateral. We discuss two equilibrium implications of this mechanism: the inefficacy of emergency credit lines in targeting liquidity constrained firms and the amplification of output volatility from the rising risk of extreme weather shocks.

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 Carbon Credit Markets

with Luis Alvarez, Victor Orestes, and Thiago Silva

Abstract: We estimate the effects of forward guidance on the supply of carbon credits when trading is subject to over-the-counter (OTC) frictions, focusing on the CBIO market in Brazil. We combine the OTC tape data with firms’ carbon credit holdings, balance sheet outcomes, and interfirm payments to study the impact on demand for carbon credits, borrowing, investment, and supply chain spillovers. We focus on the rapid increase in prices in June 2022 followed by a crash in July 2022, driven by speculation about forward guidance and an unexpected change in carbon credit policy. We show how low liquidity generated the volatility, and then propagated by limited float, insufficient hedging options, and the absence of designated market-makers.