Essays on Banking and Corporate Finance
Submitted to the Department of Economics on April 15, 2005
in Partial Fulfillment of the Requirements for the Degree of Ph. D. in Economics
The first essay provides evidence that banks are liquidity constrained and hold private
information about borrowers that hinders substitution of financing sources. Using loan level
data from a public credit bureau and exploiting an exogenous shock to bank liquidity, I show
that adverse selection prevents full arbitrage of profitable opportunities by competing
lenders and thus liquidity constraints propagate to bank-dependent borrowers.
The second essay evaluates a government program that targeted credit to small firms
through existing financial intermediaries. Using the program eligibility rule to identify the
effect on target firms, I find that target firms' total bank debt increased by 8 cents for every
dollar of program financing provided to the banks. This effect is larger when the
intermediary bank is more likely to lend to smaller firms according to observable bank
The third essay evaluates empirically the effect of credit history disclosure on the financial
position of a sample of manufacturing firms in Argentina. Results indicate that credit history
disclosure has a negative impact in the ability of firms to raise external finance when firms
are exposed to a high liquidity risk.
Thesis Supervisors: Esther Duflo
Castle Irob Associate Professor of Economics
Professor of Economics
Michael M. Koerner Associate Professor of Entrepreneurial Finance
I am in great debt to many people. First and foremost with my four advisors. With Esther
Duflo, for always asking the right questions. With...