We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood that a firm exercises a real option is strongly related to peer exercise ...behavior. Peer exercise decisions are as important in explaining exercise behavior as variables commonly associated with standard real option theories, such as volatility. We identify peer effects using localized exogenous variation in peer project exercise decisions and find evidence consistent with information externalities being important for exercise behavior.
Working Paper No. 25644 We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is ...that it allows for the possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.
We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives to internalize externalities. A key feature of the measure is that it allows for the ...possibility that not all investors are attentive to whether a manager’s actions benefit the investor’s overall portfolio. Empirically, we show that potential drivers of ownership overlap, including mergers in the asset management industry and the growth of indexing, could in fact diminish managerial motives. Our findings illustrate the importance of accounting for investor inattention and cast doubt on the possibility that the growth of common ownership has had a significant impact on managerial incentives.
How do persistent cash flow shocks affect debt repayment across the distribution of households? Using individual data on natural gas shale royalty payments matched with credit bureau data for 215,639 ...consumers, we estimate that individuals repay 33 cents of debt per dollar of windfall, and that initially-subprime individuals repay approximately 5 times more debt than initially-prime individuals do. This difference in debt repayment is driven by changes to revolving debt balances. Finally, we show that debt repayment precedes durable goods consumption, particularly for households who were initially financially constrained. These results shed new light on how deleveraging affects household consumption.
Thesis advisor: Philip E. Strahan
The first essay of this dissertation measures the real effect of increases in local deposit supply on local economic outcomes. To identify this effect, I use ...exogenous variation in local deposit supply from oil and natural gas shale discoveries. A change in deposit supply should have its largest effect on areas where credit supply frictions are the strongest. I find that the effect is strongest in areas dominated by small banks. The second essay analyzes the investment policies of public and private natural gas firms, and is joint work with Jérôme Taillard. We find that privately held firms are 60% less responsive to natural gas price changes than publicly traded firms. Additionally, we find that private firms do not respond to new shale investment opportunities, whereas public firms do. We believe these results are consistent with private firms having a higher cost of external capital. The third essay empirically tests whether firms increase risk taking activity when they are close to distress due to the risk taking incentives of equity-holders. I find that firms actually reduce risk taking when they are close to distress, and in the years prior to bankruptcy. This evidence suggests that risk reduction incentives may be more important for the average firm as it gets close to distress.
Thesis (PhD) — Boston College, 2014.
Submitted to: Boston College. Carroll School of Management.
Discipline: Finance.
We examine how wealth windfalls affect self-employment decisions using data on cash payments from claims on Texas shale drilling to people throughout the United States. Individuals who receive large ...wealth shocks (greater than $50,000) have 51% higher self-employment rates. The increase in self-employment rates is driven by individuals who lengthen existing self-employment spells, and not by individuals who leave regular employment for self-employment. Moreover, the effect of wealth reverts for individuals whose payments run out. Rather than alleviating a financial constraint, our evidence suggests that unrestricted cash windfalls affect self-employment decisions primarily through self-employment’s non-pecuniary benefits.
Personal Wealth and Self-Employment Bellon, Aymeric; Cookson, J Anthony; Gilje, Erik P ...
IDEAS Working Paper Series from RePEc,
01/2020
Paper
Odprti dostop
We examine how wealth windfalls affect self-employment decisions using data on cash payments from claims on Texas shale drilling to people throughout the United States. Individuals who receive large ...wealth shocks (greater than $50,000) have 51% higher self-employment rates. The increase in self-employment rates is driven by individuals who lengthen existing self-employment spells, and not by individuals who leave regular employment for self-employment. Moreover, the effect of wealth reverts for individuals whose payments run out. Rather than alleviating a financial constraint, our evidence suggests that unrestricted cash windfalls affect self-employment decisions primarily through self-employment’s non-pecuniary benefits.
We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price ...fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announcements do not explain the positive market returns over this period. We also show that exposure to shale oil technology has significant explanatory power for the cross-section of employment growth rates of U.S. industries over this period.
Working Paper No. 21789 Local interests change sharply after the energy booms that began in 2003, when hydraulic fracturing spurred extraction of formerly uneconomic oil and gas reserves. Support for ...conservative interests rises and Republican political candidates gain votes after booms, leading to a near doubling in the probability of a change in incumbency. All of this change occurs at the expense of Democrats. Voting records of U.S. House members from boom districts become sharply more conservative across a wide range of issues, including issues unrelated to energy policy. At the level of the individual, marginal candidates skew their voting behavior somewhat toward more conservative causes, but generally not enough to maintain power. Thus, even when the stakes are high and politicians risk losing power, ideology trumps ambition.
Working Paper No. 19403 Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find that banks ...exposed to shale booms increase their mortgage lending in non-boom counties by 0.93% per 1% increase in deposits. This effect is present only in markets where banks have branches and is strongest for mortgages that are hard to securitize. Our findings suggest that contracting frictions limit the ability of arm's length finance to integrate credit markets fully. Branch networks continue to play an important role in financial integration, despite the development of securitization markets.
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