Governance in Good and Crisis Times

Global Financial Cycle, Household Credit, and Macroprudential Policies (with Irina Mihai, Camelia Minoiu and José-Luis Peydró). Management Science, 2024, 70: 8096-8115

• Agencia Estatal de Investigación (PID2020-115660GB-I00)
• Serra Húnter program

Media / Policy

Leaning against the global financial cycle with macroprudential policy: Lessons from an emerging market, Federal Reserve Bank of Atlanta Policy Hub: Macroblog

Research Summary

We show that macroprudential policies dampen the impact of global financial conditions on local bank credit cycles. For identification, we exploit variation in the U.S. volatility index (VIX) and household and business credit registers in an emerging market economy in which banks depend on foreign funding and macroprudential measures vary over the full cycle. Our results suggest that when the VIX is low, tighter macroprudential policies reduce household lending, notably for riskier (foreign currency (FX) and high debt-service-to-income) loans and by banks dependent on foreign funding. Moreover, they increase (less regulated) local currency lending to real estate firms. Such periods are associated with less subsequent total lending to households and firms and with a lower share of FX loans at the local level. Consistently, when the VIX is low, tighter macroprudential policies dampen house prices and economic activity.

Human Capital, Institutions, and Ambitious Entrepreneurship During Good Times and Two Crises (with Victor Martin-Sanchez, Sebastian Aparicio and David Urbano). Strategic Entrepreneurship Journal, 2024, 18: 414-447

• La Caixa Social Research (SR21-00098)
• Agencia Estatal de Investigación (PID2020-115660GB-I00)
• Serra Húnter program

Media / Policy

How do human capital and pro-market institutions shape ambitious entrepreneurship in good and crisis times?, Strategic Management Society Explorer
Featured in the press releases of the Strategic Management Society
Linking academic training with experience in the market can boost entrepreneurship. The Social Observatory, “la Caixa” Foundation
In top 5% of all research outputs scored by Altmetric
Podcast: How education and experience shape entrepreneurial ambition—especially in times of crisis. AI generated by the Strategic Entrepreneurship Journal

Research Summary

We argue that the positive relationship between pro-market institutions and entrepreneurial growth aspirations is dampened for individuals with general human capital (higher education), but augmented for those with specific human capital (experience in the marketplace). However, during a crisis, the differential effect of pro-market institutions on growth aspirations manifests only for entrepreneurs with specific human capital, with stronger effects than in good economic times. We run our empirical analysis on a dataset of individual- and country-level characteristics during 2005–2020, thus exploiting variation from the Global Financial Crisis and the COVID-19 pandemic. We confirm our predictions and show stronger results for early stage (compared to nascent) entrepreneurs, and potential complementarities between human capital types. Altogether, our work paves the way to institutional adaptive policymaking.

Organizational Identity and Performance: An Inquiry into Nonconforming Company Names (with Mario Daniele Amore and Orsola Garofalo). Long Range Planning, 2024, 57: 102396

• Agencia Estatal de Investigación (PID2020-115660GB-I00)
• Serra Húnter program

Media / Policy

Do family business names affect their financial performance?, BSE Focus
Featured in the press releases of HEC Paris
Versions in German:
Ausgefallener Name? Macht erfolgreicher!, Harvard Business manager
Why the German Mittelstand needs an English Rebrand. wir-Magazin

Research Summary

Choosing the right company name is challenging and may have major consequences for firm prospects. Drawing on the strategic conformity literature, we investigate the implications of “nonconforming” company names, i.e. foreign sounding and family-unrelated, for family firms’ performance. Consistent with the idea that such names endow the business with greater visibility and recognition, we find that nonconforming names are positively associated with financial performance. This association is stronger when the firm operates in an industry with a low share of nonconforming peers and a high share of eponymous peers, in a crowded product class, and is smaller than industry peers. Collectively, our analysis provides new evidence on the strategic implications of company names.

Corporate Flight from Uncertainty and Business Dynamism (with Feng Zhou). WP available at SSRN, R&R at Management Science

• Agencia Estatal de Investigación (PID2023-147587NB-I00)
• Serra Húnter program
• Acadèmia d’Excel·lència (ex-ICREA Acadèmia) program

Research Summary

We examine the impact of corporate headquarters relocations prompted by institutional uncertainty on business dynamism. We show that firms relocating their headquarters due to the 2017 Catalan independence referendum accounted for a quarter of the total assets in the region. New firm entry rates declined in the region after the referendum, and new ventures exhibited lower growth in total assets, sales, and employment. Notably, within the region, new business entry rates declined less in the areas from which large firms relocated, suggesting fewer occupational opportunities. However, the growth of these new businesses was even lower. These results are stronger in industries with lower market concentration (indicating lower entry barriers), in non-manufacturing activities (requiring lower initial investment in fixed assets), and in the areas from which more internationally oriented large firms relocated. Regional shifts in entrepreneurs’ characteristics support our conjecture that new businesses entered due to necessity rather than opportunity. Finally, we show that firms relocating their headquarters maintained a distinct, market behavior and outperformed over the business cycle. Collectively, our findings reveal how institutional uncertainty and headquarters relocations reshape regional business landscapes and entrepreneurial dynamics.

The Opaque Scorecard: Environmental, Social and Financial Information During a Crisis (with Serhat Hasancebi). Review of Quantitative Finance and Accounting, accepted

• La Caixa Social Research (SR21-00098)
• Agencia Estatal de Investigación (PID2023-147587NB-I00)
• Serra Húnter program
• Acadèmia d’Excel·lència (ex-ICREA Acadèmia) program

Research Summary

We show that firms with higher environmental and social (ES) engagement exhibited lower financial reporting quality (FRQ) during the COVID-19 crisis—a pattern not observed in the pre-crisis period. We argue that this decline can be driven by increased complexity and reduced monitoring effectiveness under crisis-induced uncertainty. The result is robust across different ES measures, including ES scores and (social) media sentiment, and holds under both standard and synthetic difference-in-differences approaches. The effect is more pronounced in contexts with greater government intervention via income support and debt relief, policies that may have added to reporting complexity. At the firm level, the decline in FRQ is stronger among firms with weaker governance or management practices—specifically when the CEO pay is not linked to shareholder returns or that of senior executives to sustainability objectives, and with lower strategic or institutional ownership. We identify potential channels for the decline in FRQ, such as increased variation in depreciation and amortization expenses, intangible assets, R&D spending, inventories, and labor costs during the crisis.

Temporary Filing Extensions, Reporting Quality and the Allocation of Public Resources During a Crisis, (with Bruno Buchetti, Emmanuel De George and Amedeo Pugliese). WP available at SSRN

• La Caixa Social Research (SR21-00098)
• Agencia Estatal de Investigación (PID2020-115660GB-I00; PID2023-147587NB-I00)
• Serra Húnter program
• Acadèmia d’Excel·lència (ex-ICREA Acadèmia) program

Media / Policy

How do accounting policy changes during the COVID-19 crisis affect public finance and financial reporting?, UPF frontpage
Featured in UPF’s press releases
Best paper prize at the Financial Markets and Corporate Governance Conference organized by Deakin Business School

Research Summary

This study examines how extending financial reporting deadlines during economic crises affects corporate transparency and the allocation of public resources. We exploit an unexpected regulatory extension granted by the Italian government for FY2019 filings at the onset of the COVID-19 pandemic. Leveraging a novel and comprehensive dataset covering a large and representative sample of privately held Italian SMEs, we provide analyses of how delayed filings influenced firms’ access to public guaranteed loans (PGLs) and subsidies. Our findings suggest that firms taking advantage of the extended filing deadline (“late filers”) secured more PGLs and subsidies by strategically managing their FY2019 financial statements to meet subsidy eligibility criteria. This behavior is particularly pronounced among late filers in industries heavily reliant on government relief, and late filers whose pre-COVID-19 cost structures incentivized accounting manipulation. Additionally, we observe that firms exploiting the filing extension displayed similar or even weaker subsequent growth relative to early filers and firms that did not utilize the extension. Our results suggest that crisis-induced reporting deadline extensions can compromise financial transparency and potentially result in suboptimal allocation of public resources.

Strategically Small Firms and the Real Effects of Public Grants During a Crisis (with Ozan Güler and Amedeo Pugliese). WP available at SSRN

• La Caixa Social Research (SR21-00098)
• Agencia Estatal de Investigación (PID2023-147587NB-I00)
• Serra Húnter program
• Acadèmia d’Excel·lència (ex-ICREA Acadèmia) program

Media / Policy

Nominated for best paper award at the International Corporate Governance Society (ICGS) conference in Manchester, UK

Research Summary

We investigate whether strategically small firms that avoid surpassing sizedependent regulations in non-crisis periods may have benefited more from public resources during crisis periods. We define strategically small firms as those positioning themselves below either of two thresholds: (i) €6 million revenues, implying less stringent tax and its oversight, or (ii) 50 employees, benefiting from looser labor laws and reduced financial disclosure. We document systematic firms’ bunching below the revenues and employees thresholds, suggesting that these regulations may discourage firm growth. We do not observe similar behaviors at other thresholds for accounting and auditing requirements. We then show that these firms were more likely to obtain public funding during the crisis, relative to firms just above the thresholds. Despite accessing more public resources, strategically small firms do not outperform their counterparts in terms of growth or performance during and after the crisis. Overall, we document that size-dependent regulations generate strategically small firms whose behaviors in good times have unintended effects on public resource allocation in crisis times.