Working Papers

"Intangible Intensity"
(with Andrea Eisfeldt, Barney Hartman-Glaser, and Ki Beom Lee)

Abstract ▾

We develop a text-based measure of intangible investment intensity derived from firms' 10-K filings. Our approach further classifies disclosure text into knowledge, customer, and organization capital. Firms with high intangible intensity are smaller, younger, and invest heavily in R&D, SG&A, and human capital, while the three subcomponents map cleanly to distinct economic firm types. Intangible intensity contains information about future profitability that is not captured by standard accounting measures. Managerial language thus embeds forward-looking signals about intangible investment that accounting data obscure.

"Unwritten Rules: Supervisory Discretion during the Great Depression"
(with Haelim Anderson)

Abstract ▾

Does examiner human capital matter for bank supervision? Using newly digitized examination reports from the 1920s, we study a supervisory framework in which examiners flagged banks for persistent interbank borrowing that statutory limits did not address. Banks under supervisory concern were twice as likely to fail during the Great Depression, and this predictive content was largely soft information unexplained by observable balance sheet data. Banks that reduced their borrowing still failed, indicating that examiners identified a symptom of fragility rather than its source. Examiner judgment can therefore strengthen supervision, but only when supported by institutions that make discretion reliable.

"The Economics of Network-Based Deposit Insurance"  – Revise and Resubmit, Review of Financial Studies
(with Shohini Kundu and Amiyatosh Purnanandam)
▪ OFR-NBER Market Frictions and Financial Risks Initiative Research Grant
▪ FDIC/CSBS/Federal Reserve System John W. Ryan Best Paper Award

Abstract ▾

We examine the financial stability implications of deposit insurance using reciprocal deposits, a financial innovation through which banks can break up large deposits and place them with others in an offsetting manner. We show that higher insurance coverage allowed banks to stem deposit outflows during the 2023 banking crisis. Network banks paid lower deposit rates, grew larger, and expanded their local deposit market share, while assuming greater risk exposures. We discuss the trade-offs of deposit insurance and its impact on the banking sector's industrial organization.

"The Digital Divide and Refinancing Inequality"
▪ Michigan Ross Faculty DEI Research Award
▪ Xavier Drèze Prize for Best Ph.D. Student Research Paper

Abstract ▾

Low-income households derive significantly less savings from mortgage refinancing than their wealthy counterparts. I document that the rise of refinancing inequality in the United States can be partially explained by the gap in access to modern information and communications technology. Using granular spatial variation of a large-scale broadband subsidy program, I show that broadband internet facilitates refinancing activity and reduces monthly mortgage payments. These effects are large and persistent, corresponding to a 5 percent increase in disposable income and up to $18,000 in total savings for low-income households. The growth of refinancing is pronounced in underserved areas with low access to bank branches and among households that are likely to have low financial and digital literacy.

Works in Progress

"How Do Government Guarantees Affect Deposit Supply?"
(with Thomas Flanagan, Shohini Kundu, and Amiyatosh Purnanandam)

Publications

"Deposit Insurance Premiums and Bank Risk" (with Marcelo Rezende)
Review of Corporate Finance Studies, 2023, 12(2): pp. 291-325

Abstract ▾

Deposit insurance premiums impose costs on banks' balance sheets, narrowing profit margins and inducing banks to "search for yield." This paper estimates the effects of deposit insurance premiums on bank portfolio rebalancing using supervisory data and a kink in the insurance premium schedule. We show that deposit insurance premiums weaken banks' demand for reserves (a liquid asset with no credit risk) and strengthen the supply of short-term interbank loans (a less liquid asset with credit risk). We discuss the implications of these findings for optimal deposit insurance pricing.

"Intangible Value" (with Andrea Eisfeldt and Dimitris Papanikolaou)
Critical Finance Review, 2022, 11(2): pp. 299-332
▪ Media coverage: UCLA Anderson Review, VoxEU, Barron's

Abstract ▾

Intangible assets are absent from traditional measures of value despite their growing importance in firms' capital stocks. We propose a simple improvement to the classic Fama and French (1992, 1993) value factor that incorporates intangibles and addresses differences in accounting practices across industries. Our intangible value factor, HML^INT, prices assets as well as or better than the traditional value factor but yields substantially higher returns. This outperformance holds over the entire sample period, including in more recent decades during which value has underperformed. We show that the intangible value factor sorts more effectively within industries on productivity, profitability, financial soundness, and on other valuation ratios such as price-to-earnings.

"How Have Banks Been Managing the Composition of High-Quality Liquid Assets?"
(with Jane Ihrig, Cindy M. Vojtech, and Gretchen C. Weinbach)
Federal Reserve Bank of St. Louis Review, 2019, 101(3), pp. 177-201

Abstract ▾

Banks' liquidity management practices are fundamental to understanding the implementation and transmission of monetary policy. Since the Global Financial Crisis of 2007-09, these practices have been shaped importantly by the liquidity coverage ratio requirement. Given the lack of public data on how banks have been meeting this requirement, we construct estimates of U.S. banks' high-quality liquid assets (HQLA) and examine how banks have managed these assets since the crisis. We find that banks have adopted a wide range of HQLA compositions and show that this empirical finding is consistent with a risk-return framework that hinges on banks' aversion to liquidity and interest rate risks. We discuss how various regulations and business model choices can drive HQLA compositions in general, and connect many of the specific compositions we see to banks' own public statements regarding their liquidity strategies. Finally, we highlight how banks' preferences for the share of HQLA met with reserves affect the Fed's monetary policy implementation framework.