Working Papers
Working Papers
How should regulators treat corporate projections? SPAC mergers used to allow firms to share projections with lower legal liability than IPOs, until the SEC’s January 2024 rule. Using transcripts from 709 SPAC mergers, I show that forward-looking statements are pervasive, accounting for about 10% of all sentences in merger-stage transcripts. I estimate a dynamic learning model of U.S. going-public attempts (2010--mid-2023) to quantify the rule’s equilibrium trade-off. The counterfactual avoids $5.75B in investor losses but reduces firm value by $9.80B, for a net cost of $4.05B.
with Michael Gofman
We study sequential competition between two principals who hire a talented agent to perform time-sensitive tasks. Pay-for-performance contracts are interdependent and can lead to welfare losses due to inefficient effort or output allocation. The model explains hiring decisions, compensation contracts, investor reactions and long-term stock performance for 5,700 directors in 1,163 special purpose acquisition companies that raised $300B in IPOs to take startups public and to generate aggregate post-merger valuation of $1T. Calibration implies talent scarcity and conflicts increase failed searches by 60% relative to abundant talent benchmark; banning interlocks improves welfare but induces directors to leave incumbents for entrants.
with Gaurab Aryal, Zhaohui Chen, and Chris Yung
Securities issuance through intermediaries is subject to agency problems and informational frictions. We examine these effects using SPAC data. We identify ``premium'' investors whose participation is linked to lower liquidation risk, higher returns, and lower redemption rates, consistent with both informational rents and agency frictions. In contrast, ``non-premium'' investors engage in non-agency quid pro quo relationships. Specifically, they receive high returns from an intermediary (quid) in exchange for a tacit agreement to participate in weaker future deals (quo). These relationships serve as insurance for issuers and intermediaries, enabling more issuers to access markets.
with Zhaohui Chen, Alan D. Morrison, William J. Wilhelm
The relational contract at the heart of an investment banking relationship is valuable because it engenders and requires mutual trust in a setting where conflicts of interest are significant and are not easily resolved through formal contract. But a bank’s ability to commit to a relational contract depends on internal governance mechanisms that align the interests of individual bankers with those of the bank. We argue that increasing complexity in investment banks weakens internal governance and estimate a causal model that indicates that the likelihood of a relationship being broken is increasing in bank complexity.
with Gaurab Aryal
In this paper, we develop a Bertrand-Nash equilibrium model that features both competition and cooperation among lenders in the syndicated loan market. Lenders compete for loans and price discriminate against borrowers in a setting where both adverse selection and moral hazard exist. Meanwhile, lenders have cooperative incentives that arise from multi-loan contacts, which may decrease competition. At equilibrium, the interest rate set by each lender can be decomposed into three components: the marginal cost, the markup under oligopoly, and the cooperative effect.