Essays in financial economics

[摘要] This thesis consists of three empirical essays in financial economics, examining the consequences of imperfect financial markets for households, small business and house prices. In the first chapter (co-authored with Meta Brown and Brandi Coates) we explore the effect of personal bankruptcy laws on household debt. Personal bankruptcy laws in the US, and many other countries, protect a fraction of an individual;;s assets from seizure by unsecured creditors in case of default. An increase in the level of bankruptcy protection diminishes the collateral value of assets, and can therefore reduce borrowers;; access to credit. However, it might also increase the demand for credit especially from risk averse borrowers by improving risk-sharing. Using changes in the level of protection across US states and across time, we show that bankruptcy protection laws increase borrowers;; holdings of unsecured credit, but leave secured debt -mortgage and auto loans- unchanged. At the same time we find an increase in the interest rate for unsecured credit, but not for other types of credit. The effect is predominantly driven by lower-income areas and regions with higher home ownership concentration, for which an increase in the level of protection explains between 10% and 30% of the growth in their credit card debt. Using detailed individual data, we find no measurable increase in delinquency rates of households in the subsequent three years. These results suggest that changes in bankruptcy protections did not reduce the aggregate level of household debt, but they might have affected the composition of borrowing. In the second chapter (co-authored with Manuel Adelino and Antoientte Schoar) we document the role of the collateral lending channel in small business employment and self-employment in the period before the financial crisis of 2008. Small businesses in areas with a bigger run up in prices experienced a stronger increase in employment than large firms in the same industries. This increase in small business employment was more pronounced in industries that need little startup capital and can be financed more easily using housing as collateral. The increase is not limited to the non-tradable sector and is also present in manufacturing industries, in particular in those that ship goods over long distances. This indicates that this channel is separate from the aggregate demand channel by which home equity based borrowing leads to higher demand and employment creation. In aggregate, the collateral lending channel explains 15-25 % of employment variation. In the third chapter (co-authored with Manuel Adelino and Antoinette Schoar) we use exogenous changes in the conforming loan limit as an instrument for lower cost of financing, and show that cheaper credit significantly increases house prices. Houses that become eligible for financing with a conforming loan show an increase in value of 1.16 dollars per square foot (for an average price per square foot of 220 dollars). These coefficients are consistent with a local elasticity of house prices to interest rates that is lower than some previous studies proposed (below 10). In addition, loan to value ratios around the conforming loan limit deviate significantly from the common 80 percent norm, which confirms that it is an important factor in the financing choices of home buyers. In line with our interpretation, the results are stronger in the first half of our sample (1998-2001) when the conforming loan limit was more important, given that other forms of financing were less common and substantially more expensive. Results are also stronger in zip codes where personal income growth is low or declining, and in regions with lower elasticity of housing supply.

[发布机构] Massachusetts Institute of Technology