Job market paper
Last revised: April 2025
U.S. states exempt residents from taxation on the interest income of local municipal bonds. I evaluate the efficiency of these tax shields. I use changes in millionaire taxes to calibrate an equilibrium model of the municipal bond market with state competition over tax shields. I show that state tax shields raise resident demand for local municipal bonds but impose negative externalities on other states and distort risk-sharing across municipal investors. Welfare could be significantly improved by repealing state tax shields. Reducing state tax shields by 1 percentage point raises aggregate welfare by about 0.07% of state GDP.
Last revised: April 2025
Using a novel dataset on compliance enforcement actions constructed from regulatory filings and settlement agreements across 45 jurisdictions, I uncover a stark contrast: U.S. regulators impose settlements that restrict bank activity, while Chinese regulators use settlements to promote cross-border expansion. Difference-in-differences analysis of syndicated lending shows that this divergence has significant consequences: firms reduce borrowing from U.S.-regulated banks and shift toward Chinese lenders following U.S. settlements. To examine optimal regulatory strategies that balance compliance enforcement and long-term market presence, I develop a multi-period game-theoretic model of regulatory competition. These findings highlight how enforcement actions can reshape global banking in unintended ways.
Last revised: April 2025
This paper shows that state tax policy significantly affects the transmission of asset purchase programs into municipal bond prices. I establish two key parameters that create segmentation and shape bond yields: a state's top income tax rate and the wealth concentration among its richest households. Using a difference-in-differences design around the Federal Reserve's April 2020 announcement of the Municipal Liquidity Facility, I find that yields of eligible issuers in more segmented markets decline by up to 21% more than those in less segmented markets. A calibrated model explains this through preferred habitat demand, and an event study of Indiana's 2012 tax reform further confirms the role of tax-induced segmentation.
With Giovanni Dell'Ariccia, Deniz Igan, Paolo Mauro, Alexander Tieman, and Aleksandra Zdzienicka
The IMF Economic Review, Volume 70, Pages 212–250, 2022
We take stock of the costs of government interventions in the financial sector over the period 2007–2017 and track the assets still under government control. We build a new bank-level dataset on interventions and holding divestitures covering 1,114 financial institutions in 37 countries. At end-2017, few countries had fully divested their financial sector holdings. On average, public holdings were divested faster in more capitalized, profitable, and liquid banks. They remained higher in countries where private investment and credit growth grew slower, financial access, depth, efficiency, and competition were worse, and financial stability improved less.
With Itzhak Ben-David, Byungwook Kim, and Darren Roulstone
The Review of Corporate Finance Studies, Volume 12, Issue 3, Pages 539–580, 2023
Hard-to-value stocks provide opportunities for managers to exploit their informational advantage through trading on their firms’ and their own personal accounts. In contrast to the prediction that such transactions reflect private information about future events, they are contrarian and heavily depend on past returns. Corporate transactions in hard-to-value stocks outperform those in easy-to-value stocks in the early part of our sample, but this difference disappears after 2002, coinciding with a general decline in the profitability of stock market anomalies. Our evidence is consistent with managers’ perception of mispricing, rather than private information, being a key motivator of their transactions.
Media coverage: RCFS blog
With Winston Xu
Data analysis stage
How does political pressure from the Chinese Communist Party shape Chinese bank activities and credit access? To address this, we hand-collect data on the careers of top executives in China’s largest banks. We use this to create a novel measure of political pressure, the percentage of executives with prior government positions. With this measure in hand, we aim to show substantial dispersion in political pressure across Chinese banks and link it to higher future regulatory enforcement and lending activity. To quantitatively assess how banking activity depends on regulatory incentives, we model a principal-agent problem between a banking regulator and a bank and fit it to the Chinese banking sector.
With Harry Cooperman
Theory development stage
We develop a simple principal-agent contracting model between a regulator and a bank to highlight the distinct roles of banking supervision and regulation. The role of banking regulation is to set forth rules that banks must follow, e.g., by establishing minimum capital requirements and sanctions enforcement programs. The role of bank supervision is to gather information about a bank's private actions and determine compliance with applicable regulations and corrective actions should the bank be non-compliant. We use this framework to analyze several regulatory problems, such as anti-money laundering and deposit insurance.
2025: Purdue University, Emory University, Georgia Tech, Michigan State University, Texas A&M University
2024: Colorado State University, Stanford Data Science Conference, Inter–Finance PhD Seminar Series, Kiel–Göttingen–CEPR Conference
2019: IMF European and Fiscal Affairs Department, March 13, IMF Research Department, February 6
With Darrell Duffie, Zhe Geng, and Jun Pan
This teaching note describes various stages of reform over the past quarter century of China’s corporate sector. We also summarize changes in the manner in which China’s central and local governments have offered state support to the corporate sector, with distinctions between state-owned enterprises and private-owned enterprises.