Working Papers
Senior Lender Monitoring and Bankruptcy Inefficiency
How do banks adapt their monitoring behaviors as firms approach bankruptcy? Using a hand-collected dataset of bankruptcy filings and SEC filings, I find that, contrary to expectations, most firms do not experience stricter monitoring by senior lenders. Instead, banks shift toward more specific or conditional covenants, such as springing covenants, that activate under certain conditions. This shift is primarily driven by the firm’s liquidation value, as banks are more likely to relax monitoring when their claims are fully collateralized. These changes reduce monitoring costs for senior creditors but result in lower recovery rates for junior creditors and greater inter-creditor conflicts, ultimately increasing inefficiencies in the bankruptcy process. This paper highlights how changes in senior lender monitoring behavior, driven by liquidation value, significantly impact bankruptcy outcomes.
Presented at: The Asian Bureau of Finance and Economic Research 2025 Annual Conference (poster, scheduled), The 2025 RCEA International Conference in Economics, Econometrics, and Finance (scheduled), The International Banking, Economics, and Finance Association (IBEFA) Summer Meeting at the 2025 WEAI Conference (scheduled), The 2025 MRS International Risk Conference (scheduled)
2. Tax Evasion in Relational Contracts
joint with Brian Dillon, John Mulenga, Twivwe Siwale
Do firm-to-firm relationships involve tacit collusion to evade taxes? We examine this question in Zambia, where fiscal capacity is low and many firm-to-firm transactions do not generate a paper trail. For six months we randomly incentivize retail firms to request formal tax invoices from their suppliers, which makes the transaction more transparent to the tax authority. We find that both high and low levels of financial incentives induce retail firms to collect more tax invoices from their suppliers. Firms with strong supplier relationships at baseline are less responsive to the incentives, consistent with the presence of relational contracts under which there is an agreement that transactions will not be recorded. Using administrative data from the revenue authority we find that our interventions had a small but detectable impact on total VAT revenues.
Presented at: Zurich Conference on Public Finance in Developing Countries, TRA-IGC-REPOA International Conference on Tax for Growth, Cornell CIDER
3. Management and Mental Health
joint with Morten Bennedsen, Maria Schiler, Daniela Scur
This study examines how management practices influence mental health outcomes, combining management surveys, prescription drug records, and other Danish administrative data. Improved management quality is associated with reduced mental health drug usage, though the mechanisms vary by sector. Public sector high-ability workers show heightened sensitivity to management quality, while private sector effects are more uniform. Incentive-based practices emerge as particularly effective in lowering stress. These findings reveal the nuanced interplay between management practices, worker characteristics, and mental health, contributing to an understanding of the broader organizational impacts of management beyond productivity.
Work in Progress
Bankruptcy Propagation
joint with Murillo Campello