PhD Dissertations

Thorsten MARTIN, Finance, 2018

Essays in Empirical Corporate Finance

Advisor(s): David THESMAR, D. GROMB

The first chapter studies how the introduction of a futures market for steel affects steel producers and their customers. The second chapter asks how import tariffs in upstream industries affect downstream firms’ incentives to invest. The third chapter studies how managerial ownership affects performance in the mutual fund industry

Charles BOISSEL, Finance, 2018

Empirical essays in Finance

Advisor(s): David THESMAR, D. GROMB

This thesis is divided into three chapters. The first one deals with Central Clearing Counterparties (CCPs) and their resiliency in crisis times. This is a joint work with François Derrien, Evren Ors and David Thesmar. Focusing on CCPs backed repotrades during the eurozone crisis, we show that the market factored in the default of CCPs. In turn, this affected their capacity to ensure liquidity in the interbank market. Our results have strong consequences for the way CCPs should be regulate.The second chapter aims at quantifying the impact of the rise of the concentration in the banking sector on aggregate credit fluctuations.Building on novel empirical approach, I show that big players’ idiosyncratic shocks have a limited impact on aggregate credit. The explanation lies in the fact that the strength of banking groups idiosyncratic shocks is limited compared to aggregate and subsidiaries level ones.The last chapter, a joint work with Thomas Bourveau and Adrien Matray, focuses on the transmission of corporate risk culture. We show that subsidiaries of the same banking group tend to assess future risks in similar ways. In turn, this gives insights on how banking crisis can spread be fueled by corporate risk culture.

Victoria SLABIK, Finance, 2018

Channels of Interfirm Funding Provision: Trade Credit and M&A

Advisor(s): François DERRIEN

The first chapter studies how refinancing risk impacts product market performance. I find that firms with a large fraction of short-term debt (i.e., debt maturing within three years) exhibit significantly lower growth in sales and market share.The second chapter asks how horizontal M&As affect peer stock market evaluation. Horizontal M&A announcements induce negative average industry peer revaluations in a large sample of public and private M&A transactions. The average peers’ revaluation is a strong predictor of future industry returns. The revaluation of peers also depends on the public status of the target (positive when the target is public and negative when the target is private) and varies systematically with proxies for overall market misvaluation. Our findings are consistent with the idea that investors incorporate new information about industry-wide misevaluation into the valuation of non-merging firms.The third chapter studies how labor laws affect payout policy. This paper shows that labor bargaining power affects both capital structure decisions and payout policy. I find that the adoption of the wrongful discharge law leads to an increase in dividends per share, dividend yield, and the dividend payout ratio whereas book leverage decreases.

Jean-David SIGAUX, Finance, 2017

Three Essays on Bond Lending

Advisor(s): Thierry FOUCAULT

In the first chapter, I ask if short-sellers are superiorly informed about sovereign auctions. I find a large average increase in demand for short-selling prior to auctions. Yet, the demand for short-selling a bond does not predict a subsequent increase in the bond's yield.Overall, there is no evidence that short-sellers or edict or interpret auction outcomes better than the market. In the second chapter, I develop and test a model explaining the gradual price decrease observed in the days leading to large anticipated asset sales such as Treasury auctions. In the model, risk-averse investors anticipate an asset sale which magnitude, and hence price, are uncertain. I show that investors face a trade-off between hedging the price risk with a long position, and speculating on the difference between the pre-sale and the expected sale prices. Due to hedging, the equilibrium price is above the expected sale price. As the sale date approaches, uncertainty about the sale price decreases, short speculative positions increase and the price decreases. In line with the predictions, I find that the yield of Italian Treasuries increases by 1.2 bps after the release of auction price information, compared to non-information days.In the third chapter, I study the link between prices and repo rates during the subprime crisis. I find that the no-arbitrage relationship between prices and repo rates in Duffie (1996) fares worse during the crisis. However, low-reporate bonds have an 18.0% higher probability of being more expensive than identical high-reporate bonds during the crisis, compared to only 9.0% before the crisis. Overall, while there are high limits of arbitrage, prices and repo rates feature larger co-movements during the crisis.

Alina ROSU, Finance, 2016

Three Essays in Asset Management

Advisor(s): Laurent CALVET

The first chapter shows that mutual funds that hold illiquid stocks (“illiquid funds”) outperform funds that hold liquid stocks (“liquid funds”). There is evidence this outperformance arises from stock selection skills of illiquid funds. The stocks held by illiquid funds outperform portfolios matched by characteristics. Liquid funds declare benchmarks that make their benchmark adjusted returns appear larger. A portfolio of stocks held by illiquid funds subsequently outperforms a portfolio of stocks held by liquid funds. The second chapter documents a predictability pattern in returns. This chapter identifies high opportunities in stocks with difficult valuation as times when returns of neglected stocks diverge from returns of covered stocks. Subsequent returns of stocks with difficult valuation are higher when beginning of period opportunities are high, as compared to when beginning of period opportunities are low. This is consistent with an information risk theory, where investors demand a higher premium to hold stocks with higher probability of informed trading, because they fear adverse selection. The third chapter explores instances when mutual funds change their style (style is regarded as risk exposure alongside usual factors). Mutual funds do not take more risk when it is more profitable to do so. After performing badly, mutual funds move closer to the style of good performing peer funds. Young funds' styles diverge from the style of old peer funds. Recently hired managers diverge in style from veteran managers of peer funds. When the average fund takes more risk alongside a style dimension, it does not simultaneously consider other style dimensions.

Boris VALLEE, Finance, 2014

Three Essays on Financial Innovation

Advisor(s): Ulrich HEGE, Christophe PERIGNON

This dissertation is made of three distinct chapters that empirically investigate financialinnovation in different fields: household finance, public finance and financial institutions.The first chapter presents a work joint with Claire C´el´erier, analyzing the growingcomplexity of retail structured products, and how bank use complexity to mitigate competitivepressure. The second chapter, joint with Christophe P´erignon, studies how localgovernments strategically use toxic loans according to their political incentives. The thirdchapter explores the effects of exercising contingent capital, and how these instrumentscan contribute to solving the bank leverage dilemna.

Sven Michael SPIRA, Finance, 2014

Investor Horizon and Portfolio Choice

Advisor(s): Ulrich HEGE

This dissertation consists of four distinct chapters. The first chapter presents joint work withChristophe Spaenjers. We find that individuals with longer subjective life horizons hold higherconditional equity shares, and the effect of a shortening life horizon on portfolio choice is offset bybequest motives. In the second chapter, I examine the explanatory power of birth order for finan-cial household decisions. I show that firstborns differ in their financial decision-making from laterborn siblings. The results highlight the importance of personal family experiences for householdchoices. In the third chapter, I document that, in surveys, the presence of companions decreasesthe probability of respondents replying, and increases the probability of respondents overreportingtheir self-assessed abilities. The overreporting leads to a downward bias in the estimates of theimportance of overconfidence for individuals’ behavior. The fourth chapter presents joint work withThomas Bourveau and Fran¸cois Brochet. We identify M&A lawsuits, where plaintiffs allege that thefirm hid poor performance related to a prior acquisition. Using the filing of a lawsuit as an industryshock, we show findings consistent with a disciplining effect from the lawsuit for the investmentbehavior of peer firms’ managers.

Olivier DESSAINT, Finance, 2014

Essays in Empirical Corporate Finance

Advisor(s): François DERRIEN

This dissertation is made of three distinct chapters. The first chapter shows that managersoverreact to salient risks. They respond to the occurrence of a hurricane event when theirfirms are located in the neighborhood of the disaster area. The sudden shock to the perceivedliquidity risk leads them to temporarily increase the amount of corporate cash holdings, eventhough the real liquidity risk remains unchanged. The second chapter examines earningsannouncements by US firms, and how far in advance notice of the event is given (the"advance notice period"). Such advance notice period affects how much investors payattention to earnings news. This variation in investors' attention affects short-run and long-runstock prices, thereby creating incentives for firms to strategically reduce the advance noticeperiod when they plan to disclose bad news. The third chapter studies M&A league tables,which provide rankings of investment banks. The rank of a bank in the league table predictsits future deal flow. This creates strong incentives for banks to manage their ranks in theleague table.

Hedi BENAMAR, Finance, 2014

Essays in Behavioral Finance

Advisor(s): Thierry FOUCAULT

This thesis is made of three distinct chapters. In the first chapter, I test whether the displayformat of financial information matters for the individual investor. I find that a moreefficient information display allows investors to increase returns on their limit orders, becauseit becomes easier for them to mitigate the risk of adverse selection when tradingwith those orders. My findings suggest that retail investors have bounded rationality. Inthe second chapter I test whether liquidity provision to the market can be a profitablestrategy, after fees, for active retail investors. I find that only individuals ranked in thetop decile of performance can persistently beat the market using highly contrarian limitorder strategies. Limits-to-arbitrage seems to explain why those top retail exploit tradingopportunities before other more sophisticated arbitrageurs. In the third chapter, I studythe retail trading strategies around stock earnings announcements. I find that round-tripsstarted one day before an announcement are more profitable and much shorter in durationthan those started during the non-announcement period. Retails reverse their winningtrades on the event date, which can slow down the adjustment of prices to new information.

Adrien MATRAY, Finance, 2014

Empirical essays in finance

Advisor(s): David THESMAR

This dissertation is made of four distinct chapters. The first chapter with Johan Hombert shows that when lending relationships are hurt, it reduces the number of innovative firms and foster inventor mobility who move out of geographical areas where lending relationships are hurt. The second chapter presents a work with Claire Célerier and shows that supply-side factors account for a large part of the unbanked household phenomenon in the US. The third chapter studies spillovers of innovation and shows that when some firms innovate less other firms in the same city innovate less in response and this effect declines sharply with distance. The fourth chapter with Olivier Dessaint presents evidence that managers systematically respond to near-miss liquidity shocks by temporarily increasing the amount of corporate cash holdings.