I am an Assistant Professor of Finance at the Gatton College of Business and Economics at the University of Kentucky. My research spans two areas of finance: entrepreneurship and asset management. A unifying theme across my work is the identification of issues that calls for the action of policymakers in order to improve the conditions of the less empowered.
Prior to joining UK. I recived a Ph.D in Finance from UC Berkeley, a MS in Economics from the University of São Paulo, and a B.S. in Mathematics from the University of São Paulo .
with Adair Morse and Alexander Dyck
Forthcoming, Review of Financial Studies
Public pension boards fear stakeholder outrage if they were to compensate internal investment managers with market-level salaries. We derive implications theoretically in an agency-portfolio choice model motivated by inequality-aversion. In a global sample, relaxing the effect of outrage on contracting leads to an average annual incremental value-add of $49 million generated through 11 bps in higher excess returns from risky assets, at the cost of $302,429 in additional compensation. Governance reforms that address outrage by reducing political appointees or requiring independent skills-based boards can increase the annual value-add. These findings are orthogonal to costly political distortions from underfunding and pay-to-play schemes.
with Vinicius Augusto Brunassi Silva
We analyze how creditors behave in corporate renegotiations, constructing a novel database containing 11,388 claim-level votes across 200 bankruptcy reorganization filings in Brazil. We document several regularities in the data and analyze the role played by an important constraint: the time available for negotiations, which we proxy by the duration of the court process. Using random assignment of bankruptcy cases across judges with heterogeneous tendencies to delay, we find that each additional month of court delay increases the probability of approval votes from banks and accounts receivable owners by 0.05, or 6.3% relative to the average. This increases the probability of plan approval. Consistent with the notion of time constraints reducing the ability to reach many creditors, we show that these effects are driven by companies with high debt dispersion. Our results suggest that reforms expediting bankruptcy cases could undesirably increase the number of liquidations.
Characteristics of Mutual Fund Portfolios: Where Are the Value Funds?
with Martin Lettau and Sydney Ludvigson
This paper provides a comprehensive analysis of portfolios of active mutual funds, ETFs and hedge funds through the lens of risk (anomaly) factors. We show that that these funds do not systematically tilt their portfolios towards profitable factors, such as high book-to-market (BM) ratios, high momentum, small size, high profitability and low investment growth. Strikingly, there are almost no high-BM funds in our sample while there are many low-BM “growth” funds. Portfolios of “growth” funds are concentrated in low BM-stocks but “value” funds hold stocks across the entire BM spectrum. In fact, most “value” funds hold a higher proportion of their portfolios in low-BM (“growth”) stocks than in high-BM (“value”) stocks. While there are some micro/small/mid-cap funds, the vast majority of mutual funds hold very large stocks. But the distributions of mutual fund momentum, profitability and investment growth are concentrated around market average with little variation across funds. The characteristics distributions of ETFs and hedge funds do not differ significantly from the those of mutual funds. We conclude that the characteristics of mutual fund portfolios raises a number of questions about why funds do not exploit well-known return premia and how their portfolio choices affects asset prices in equilibrium.
The Real Effects of Politicians' Compensation
with Igor Cunha
We study how politicians’ compensation affects the real economy. Specifically, we investigate the effect of legislators’ wages on business activity in Brazil. We identify our results using a constitutional amendment that established salary caps for legislators in a given municipality based on arbitrary population cutoffs. Higher politician wages are associated with increases in firm and job creation and firms’ average startup investments. Better paid legislators bring more resources to the municipality and increase expenditure on items that increase local economic productivity. Our evidence highlights the potential adverse effects on the private sector of lowering politicians’ salaries.
Can regions with prevalent violent and property crimes promote business by reducing crime rates through law enforcement? Using exogenous state-level police strikes in Brazil, I show that a short-term decrease in the police force leads to an increase in crime rates and a reduction in business activity. Taken together with the finding of the crime literature that lower business activity leads to more crimes, this implies a feedback loop between crime and business, suggesting the existence of multiple Pareto-ranked equilibria. I use the introduction of a law enforcement program called the Pacifying Police Units in the Rio de Janeiro city to provide evidence that a substantial (yet temporary) police shock can create a persistent reduction in crime and a persistent increase in entrepreneurship, consistent with a shift away from the undesirable high-crime low-business equilibrium.