Three essays on financial economics

Da Silva Cortes Goncalves, Gustavo

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Description

Title

Three essays on financial economics

Author(s)

Da Silva Cortes Goncalves, Gustavo

Issue Date

2019-03-29

Director of Research (if dissertation) or Advisor (if thesis)

Bernhardt, Dan

Doctoral Committee Chair(s)

Bernhardt, Dan

Committee Member(s)

• Pennacchi, George G.
• Campello, Murillo
• Shin, Minchul

Department of Study

Economics

Discipline

Economics

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• financial economics
• financial crises

Abstract

This dissertation contains three chapters that study topics on financial intermediation, corporate finance, and empirical asset pricing. Below are the individual abstracts. Chapter 1: Credit Shock Propagation in Firm Networks: Evidence from Government Bank Credit Expansions We study how bank credit shocks propagate through supplier-customer firm networks. We do so using administrative data that covers the near-universe of firm-to-firm transactions in Brazil around the debacle of Lehman Brothers. Using the counter-cyclical reaction of government-owned banks in Brazil after Lehman's failure as a policy experiment, we show that credit shocks originated in bank-firm relationships are transmitted throughout the network of suppliers and customers, with measurable consequences for firms' real outcomes and survival probability. A firm with direct and indirect access to government credit (through its customers or suppliers) observed a 12.5% greater survival probability, vis-`a-vis 4% when the firm has only direct access. Critically, we uncover drawbacks of these interventions, including a persistent increased concentration in the market power of firms that benefited from government liquidity. Chapter 2: Stock Volatility and the Great Depression Stock return volatility during the Great Depression has been labeled a ``volatility puzzle'' because the standard deviation of stock returns was 2 to 3 times higher than any other period in American history. We investigate this puzzle using a new series of building permits and leverage. Our results suggest that volatility in building permit growth and financial leverage largely explain the high level of stock volatility during the Great Depression. Markets factored in the possibility of a forthcoming economic disaster. Chapter 3: Exporting Uncertainty: The Impact of the Brexit Vote on US Corporations Building on a real-options model of firm responses to uncertainty, we show that the 2016 Brexit Referendum had measurable consequences for US corporations, with effects on decisions regarding investment, divestitures, employment, R&D, and savings. The effects we identify are short-lived and modulated by the degree of reversibility of capital and labor. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Employment cuts are observed inside US borders, particularly in industries with more unionized workers. Job posting data point to a shift from full- to part-time positions in firms most exposed to the UK. Our results show how foreign-born uncertainty can be transmitted across borders, shaping domestic capital formation and labor allocation.

Graduation Semester

2019-05

Type of Resource

text

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http://hdl.handle.net/2142/105153

Copyright and License Information

Copyright 2019 Gustavo Da Silva Cortes Goncalves

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