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PhD Program

PhD Dissertation Defense, Chhavi Rastogi, Finance

Chhavi Rastogi, HEC PhD, Finance 2022

Congratulations to Dr Chhavi Rastogi, Finance specialization, who successfully defended her Doctoral Dissertation at HEC Paris on August 30, 2022. Dr Rastogi has accepted a postdoc position at University of Bonn (Germany).

Specialization: Finance

Topic: Essays in entrepreneurial finance and development

Supervisor:  Johan Hombert, Professor, HEC Paris 

Jury Members:

  • Pat AKEY, Associate Professor of Finance, University of Toronto  
  • Alice BONAIME, Associate Professor of Finance, University of Arizona 
  • François DERRIEN, Professor of Finance, HEC Paris  
  • Johan HOMBERT, Associate Professor of Finance, HEC Paris, Supervisor

Abstract : 

In my first paper, I study the spillover effects of removing barriers to growth in one product market on entry and growth of firms in the downstream market. Firms that are constrained produce low quality goods and, in turn, constrain the downstream market. I exploit the repeal of product reservation in India, whereby hundreds of products stop being reserved for exclusive production by small firms. With a more efficient input market, entry in the downstream product market increases with no observable decline in quality of entrants. Productive downstream firms grow and less productive ones shrink. My results imply that business dynamism has positive spill-over effects along the supply chain. 

In another paper, I study the process of creative destruction and whether incumbents faced with displacement risk continue to innovate. To do so, I construct a measure of displacement risk using patent text similarity measures. Theory predicts that threat of technologically advanced entry incentivises firms closer to the frontier to catch up but may discourage innovation in firms further away from the frontier. As predicted by theory, firms far away from the frontier decrease their investment in R&D when faced with displacement risk. At the same time, I find that ex-ante low productivity firms are not more likely to exit than ex-ante high productivity firms. Moreover, while firms far away from the frontier reduce in-house R&D spending, they are more likely to engage in mergers and acquisitions and invest as corporate venture capitalists. My findings suggest that upon facing displacement risk, firms regain their innovation edge by investing outside the boundaries of the firm. 

In a third paper, my co-authors and I investigate the role of banks in propagating the negative effects of large corporate bankruptcies to the real economy. Banks that suffer from large corporate bankruptcies on their loan portfolio increase loan spreads in subsequent commercial lending. The effect persists after controlling for borrower risk, industry and geographical contagion. The effect does not manifest via deterioration of the bank’s balance sheet, loss of reputation or bank learning about its screening ability. Rather, it stems from earnings management by the bank and disproportionately affects small firms with fewer outside options for raising financing. Overall, our findings suggest that banks play an important role in disseminating microeconomic shocks.

Keywords:

Innovation, entrepreneurship, bankruptcy, barriers to growth