Research Interests: Corporate Finance, Labor and Finance, Banking, Law and Economics, Development Economics
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Publications and Accepted Papers
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The Labor Effects of Judicial Bias in Bankruptcy (with Aloisio Araujo, Rafael Ferreira, Spyridon Lagaras, Jacopo Ponticelli and Margarita Tsoutsoura)​
Journal of Financial Economics, 150(2), 2023.
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[Paper]
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[NBER Paper Version: June 2023]
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Abstract: We exploit the random assignment of cases across courts in the state of Sao Paulo in Brazil to study the effect of judicial bias on labor market outcomes. Employees assigned to courts that favor firm continuation are more likely to stay with their employer, but they earn, on average, lower wages after bankruptcy. The effect is concentrated in periods of economic expansion. We explore several potential mechanisms that can drive this result, including risk aversion, adjustment costs, non-wage amenities and information frictions. The evidence suggests that imperfect information about outside options in the local labor market can rationalize this result.
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Working Papers
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Bankruptcy Outcomes in Congested Courts: Evidence from Brazil (with Aloisio Araujo, Gustavo Araujo and Rafael Ferreira)
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Abstract: How does the congestion of courts affect the outcomes of bankruptcy procedures? We investigate this question by exploiting data on bankruptcy requests filed in the state of São Paulo in Brazil together with a measure of the average backlog of cases by judicial district. To establish a causal relation, we implement an instrumental variable strategy that exploits the state law on judicial organization to create an exogenous measure that strongly predicts the level of congestion of courts. We find evidence that firms operating in districts with a higher level of court congestion have a lower probability of being liquidated and exiting the market during a reorganization procedure. Additionally we find evidence consistent with a more congested court, by making the judge busier, leading to a slower judge and more time in court to end the case. How does a slower judge can result in a higher probability of firm survival in a reorganization procedure? We discuss two potential mechanisms to be empirically investigated that might help rationalize this result. First we investigate whether slower judges lead to longer length of the intermediary phases of the reorganization procedures and ultimately favor firm recovery. And second we investigate whether a higher congestion, by decreasing the firm liquidation value and the creditors' expected recovery, makes the firms more able to renegotiate downward their obligations and, ultimately, more likely to survive.
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Court Congestion and Creditor Passivity: Evidence from Bankruptcy Requests in Brazil (with Aloisio Araujo, Gustavo Araujo, Rafael Ferreira and Jacopo Ponticelli)
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Abstract: This paper uses a novel dataset on Brazilian bankruptcy requests to investigate whether the congestion of courts affects a creditor's decision to request or not the liquidation of a defaulted debtor. Exploiting the large variation in the level of congestion of the courts across the state of São Paulo, we find that banks are more passive with defaulted debtors that are located in municipalities with more congested courts, waiting longer since default until requesting the liquidation. Implementing an instrumental variable strategy based on the laws that rule the judicial organization, we find results in the same direction. With a simple theoretical framework, we argue that the possible mechanism is that creditors' recovery in liquidation is lower in less efficient courts, potentially increasing firms' bargaining power and leading creditors to postpone the decision about requesting the liquidation of a debtor. This evidence suggests that the congestion of the judiciary affects the use by the creditors of their legal protection prescribed by the bankruptcy law.
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In Progress
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​Precedents and Judicial Behavior  (with Daniel Chen and Henrik Sigstad)
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Asymmetric information in the Brazilian credit market: testing adverse selection predictions  (with Gustavo Araujo, Felipe Iachan and Everton Santos)
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Estimating Expected and Unexpected Losses: Evidence from an Ecuadorian Microcredit Portfolio  (with Adriana Uquillas)