I am an Assistant Professor with the Finance Department at the Stephen M. Ross School of Business, University of Michigan.
I am also a Research Affiliate for the Banking and Corporate Finance Programme at the Centre for Economic Policy Research.
I completed a Ph.D. and M.Phil. in Finance at Columbia Business School and a BA in Economics and minors in Mathematics and Classics Studies at the University of Florida.
Email: rdsimone@umich.edu
Address: 701 Tappan Street, R5446, Ann Arbor, MI 48109
Revise and Resubmit, The Review of Financial Studies
Abstract
I use an Ecuadorian reform to show that firm monitoring by tax authorities increases firm transparency, improves firm financial access, and impacts employment and investment. Using a regression discontinuity design, I find that borrowing costs decrease by 18.9% while borrowing increases by 23.1% for highly scrutinized firms. Moreover, treated firms report approximately 20% higher investment and employment. The effect is strongest for the firms with a higher evasion risk and where private contracts are costlier to enforce. This indicates that the effect of tax monitoring works primarily through reducing fraudulent financial statements and firm cash flow diversion.
Abstract
We examine how lender conduct shapes the incidence and welfare effects of financial taxes and subsidies. Exploiting Ecuador’s unanticipated 2014 loan tax and administrative lending data, we estimate and test a structural model nesting Bertrand-Nash competition, joint maximization, and partial cartels, identified using tax pass-throughs. We reject the Bertrand-Nash benchmark: banks internalize rivals’ profits when setting prices. Imposing Bertrand-Nash pricing overstates tax incidence on borrowers, understates fiscal capacity, and misstates the excess burden in a direction that depends on whether forgone supra-competitive profits count as a social loss. Conduct is therefore a first-order input to evaluating financial taxes and subsidies.
Abstract
We study manufacturers’ production responses to a place-based pollution-control regulation. Firms lower emissions by improving energy efficiency, substituting toward cleaner fuels, and shifting from producing electricity to purchasing it from the grid. They move away from coal-intensive products and adopt abatement technologies. However, in the aggregate, we document lower product variety and an altered firm-size distribution driven by reduced entry of large firms. A back-of-the-envelope analysis indicates that the policy is cost-effective due to substantial environmental gains. Overall, this paper highlights how environmental regulation shapes industrial production and the resulting trade-offs between pollution reduction and long-term economic growth.
Abstract
We study how bank competition affects commercial lending, credit allocation, and firm performance. Using evidence from Ecuador’s commercial credit market and pass-through estimates from the 2014 SOLCA loan tax, we identify lending distortions due to supply-side bank market power and distinguish them from other sources of pricing power in credit markets. We find that 26% of observed loan markups are due to joint profit maximization and that moving to Bertrand-Nash competition would substantially reduce loan prices, increase loan use, and expand credit access. These distortions vary markedly across borrowers and are especially large for small and young firms and for new lending relationships. We combine this empirical evidence with a structural general equilibrium model of firm dynamics and bank competition in the lending market to quantify how limited bank competition distorts credit allocation, firm-level outcomes, and aggregate allocative efficiency.
Abstract
We study a 2012 reform in Israel where all exchange-traded products listed on the Tel Aviv Stock Exchange (TASE) adopted the Exchange Traded Fund (ETF) creation mechanism wherein designated market makers arbitrage between the index price and the net asset value of its benchmark. The reform greatly decreased the cost of this arbitrage activity and improved the liquidity of the ETN. We document that in response there was a significant increase in demand for ETN. Next, we find that the effect was stronger for illiquid indices containing smaller stocks. We utilize this heterogeneity to estimate the causal effect of inflows into the ETN on the price of the benchmark securities. A 1 p.p. increase in ETN ownership as a percent of market capitalization leads to an 11.7% increase in the price of stocks, revealing highly inelastic demand for equities. Our findings provide new evidence on how passive inflows can change the distribution of capital across indices, and in turn impact price and real efficiency.
With Felipe Brugués, Thi Mai Anh Nguyen, and Juan Sebastián Vélez-Velásquez.
With Felipe Brugués, Thi Mai Anh Nguyen, and Juan Sebastián Vélez-Velásquez.
With Luis Armona, Felipe Brugués, and Sebastián Otero.
