Corporate Finance Essay

403 WordsFeb 20, 20132 Pages
Essays on Banking and Corporate Finance by Daniel Paravisini Submitted to the Department of Economics on April 15, 2005 in Partial Fulfillment of the Requirements for the Degree of Ph. D. in Economics ABSTRACT 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 characteristics. 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 Abhijit Banerjee Professor of Economics Antoinette Schoar Michael M. Koerner Associate Professor of Entrepreneurial Finance 2ACKNOWLEDGEMENTS I am in great debt to many people. First and foremost

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