Assistant Professor Roberto Steri, and postdoctoral researcher, François Koulischer have both recently published research in their respective fields in The Journal of Financial Economics.
This journal is one of 50 top academic journals used to calculate the Financial Times (FT) Research Rank.
Prof. Steri’s recent article, “The Sources of Financing Constraints”, co-authored by Boris Nikolov (University of Lausanne) and Lukas Schmid (Duke University), was published in March 2020.
The paper precisely addresses the broad question of what are the sources of financing constraints. Financing constraints limit the realisation of business projects from which firms and the entire economy could benefit. Although there is consensus on the importance of firm financing constraints for corporate policies, there is no agreement on the underlying frictions that prevent firms from raising external financing. The effectiveness of regulatory policies and subsidies to promote investments heavily depends on the understanding of such sources.
The major challenge to answer this question is that financing frictions are inherently unobservable. Thus, the authors estimate dynamic firm financing models embedding many financial frictions and assess which models best rationalise observed corporate policies across various samples of firms. Their tests indicate that larger public firms raise debt mostly for tax reasons and are constrained by bankruptcy costs (trade-off models), smaller public firms raise debt mostly to grow and are constrained by their ability to pledge collateral (limited commitment models), and private firms are constrained by agency problems of insiders who have incentive to divert resources (moral hazard models).
Roberto Steri is Assistant Professor in Empirical Finance in the Department of Finance at the University of Luxembourg. His research centres around the impact of financial constraints on the policies of industrial corporations, banks, and institutions, with a focus on their asset pricing implications.
François Koulischer’s article, “Restarting asset purchases in the euro area: Lessons from €2 trillion of ECB purchases”, co-authored by Ralph Koijen (University of Chicago), Benoît Nguyen (Banque de France), and Motohiro Yogo (Princeton University) was accepted for publication in The Journal of Financial Economics in February 2020.
The paper seeks to better understand the investor impact of central bank asset purchase programmes designed to implement monetary policy, such as the recent purchase of €750 billion worth of financial assets by the European Central Bank (ECB) in order to address the fall in inflation and the economic consequences of COVID-19. The authors use new data on security-level portfolio holdings for all major investor sectors, including banks, insurance companies and mutual funds, and for all countries in the euro area from 2013 Q4 to 2017 Q4 to measure which investors sell to the ECB, how investors’ portfolio rebalancing impacts the distribution of risk across investors, how it impacts government yields, and which investors experience the largest appreciation of their asset portfolio.
Koulischer and the team of researchers find that the sector selling most to the ECB are investors domiciled outside of the euro area. They do not find evidence that risks get concentrated in certain sectors or geographies. The researchers estimate a sector-level asset demand system using instrumental variables to connect the dynamics of portfolio rebalancing to asset prices. Their estimates imply that government yields declined by 63 basis points on average.
François Koulischer is a postdoctoral researcher in the Department of Finance at the University of Luxembourg. His research interests include financial intermediation, applied macroeconomics and sustainable finance.