Working Papers

We study how health insurance-induced 'job-lock' of workers impacts firms' capital structure choices. On the one hand, higher health care costs for firms may induce them to adopt conservative financial policies. On the other hand, it may reduce worker mobility and allow firms to increase financial leverage by lowering financial distress costs. To disentangle these two effects, we use staggered adoption of state-level health mandates, that significantly increase the cost of health insurance borne by firms. We show that following the adoption of high-cost mandates firms significantly increase their corporate leverage. These effects are stronger for firms whose employees value health insurance more, which operate in industries with lower job mobility and in states where employees have less bargaining power. Our results are robust to geographic regression discontinuity design where we focus on firms located in counties adjacent to state borders. Overall, we document that firms benefit from increase in health care costs to the extent employees value associated benefits.

-- AFA  PhD Poster Session 2018 (to be presented)

How financial constraints affect incumbent supplier firms choice of extending more trade credit vis-`a-vis offering price discounts when facing increased threat of entry by competitors? Threatened incumbent supplier firms may extend more trade credit, ex-ante, to defend their market power, or they may reduce prices or both. I test these predictions by exploiting plausibly exogenous, staggered removals of product level entry barriers for Indian manufacturing firms, and find that an average incumbent supplier firm extends 11% more trade credit and lowers price by 8.6% with an increased threat of entry. Interestingly, firms with deeper pockets offer longer terms on trade credit, while constrained firms rely on price discounts. Also, I find that financially constrained customers to take credit offers while unconstrained customers take price discounts. I further confirm my results using another policy change in the country that improved access to finance. Thus emphasize the role of trade credit as a strategic tool to defend market power, when firms face financial constraints.
-- ABFER 2016, Pacific-Basin Finance Journal Best Paper Award  at AsFA 2016, FIRS 2017, SFS Cavalcade 2017


Do Debt Contract Enforcement Costs Affect Financing and Asset Structure? (with Radhakrishnan Gopalan and Abhiroop Mukherjee)

--  The Review of Financial Studies, 2016, 29(10): 2774-2813

-- The Journal of Financial Economics, 2017,  124(1): 195-221