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

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

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

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

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

Summary

Institutional shocks can reshape regional business conditions by increasing uncertainty and altering the environment for incumbent firms and prospective entrepreneurs. We examine these issues in the context of the 2017 Catalan independence referendum, which triggered institutional uncertainty and induced many firms to relocate their corporate headquarters (HQ) to other Spanish regions. These relocations were economically salient, accounting for roughly one quarter of the total assets of Catalan firms. Using granular data on firms, HQ relocations, entrepreneurs, and regions, we document several empirical findings. Firms that relocated their HQs were systematically distinct from non-relocating firms and largely outperformed over the business cycle. The shock, together with the relocation of large firms’ HQs, reshaped the regional business environment, worsening conditions for both incumbent and new firms in Catalonia. Within Catalonia, however, areas from which large firms relocated their HQs experienced relatively higher new business entry rates, but lower new venture growth. These patterns were more concentrated in non-manufacturing industries and in areas from which more internationally oriented large firms relocated their HQs. They were also accompanied by compositional shifts consistent with necessity entrepreneurship and by weaker income and wage growth in tax filings.

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

Awards

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

Research Summary

We study whether firms that remain strategically small to avoid size-dependent regulations in normal times disproportionately access public support during the COVID-19 crisis. Using Spanish firm-level data, we identify bunching below two thresholds that introduce increased oversight: €6 million in revenue, where tax compliance and monitoring become stricter, and 50 employees, where labor regulation and disclosure obligations become more demanding. Firms just below these thresholds were more likely to obtain public funding during the crisis than otherwise similar firms just above them. Mechanism tests point away from financing needs and higher credit costs, and instead suggest that strategic avoidance of oversight shaped firms’ take-up of lightly screened public resources. Despite accessing more public resources, strategically small firms invested less and exhibited weaker performance, while reducing short-term debt. Overall, our evidence suggests that size-dependent regulations in normal times and crisis-relief policies can jointly generate unintended effects in the allocation and use of public resources.

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

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

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.

Governing Family Firms in Times of Crisis. In Research Handbook on Family Business Governance, Edward Elgar, forthcoming

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

Summary

Coming soon!

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 / Awards

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.

Misreporting and Guaranteed Loans (with Daniel Dejuan-Bitria, Ozan Güler, Dmitry Khametshin)

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

Summary

Coming soon!

Market Spillovers from Corporate Controversies: A Moral Foundations Perspective (with Nahuel Depino-Besada and Ekin Ilseven)

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

Awards

Runner-up “Best Paper on Environmental & Social Practices,” Academy of Management Annual Meeting, OMT division, Philadelphia
Academy of Management Proceedings (Best Papers)

Summary

Coming soon!