Research

Working Papers:

• "The Effect of Monetary Policy on Community Bank Financial Reporting"

  • Abstract: I examine how community banks’ deposit strategies shape risk-taking, local credit outcomes, and financial reporting during periods of monetary tightening. Using the rapid increase in interest rates beginning in 2022 as a shock to banks’ funding strategies, I find that high-deposit beta community banks increase portfolio risk to offset higher funding costs and manage net interest margins. Specifically, these banks shift away from low-risk government-backed securities and toward higher-risk, higher-yielding assets. I then show that these portfolio reallocations have consequences for local communities. Counties with greater exposure to high-deposit beta banks experience lower new-business growth, higher mortgage denials, and lower home values following the rate increases. Having established that high-deposit-beta banks increase risk and that these changes affect local economies, I examine whether banks transparently report the increased risk through loan loss provisions. I find that high-deposit-beta banks reduce loan loss provisions despite taking on greater risk, consistent with these banks using provisioning discretion to obscure risk and manage reported capital. Finally, I find that more robust internal reporting systems do not mitigate either the increased risk-taking or the under-provisioning behavior.

  • Dissertation

• "Lender Financial Reporting and Debt Contracting"

  • Abstract: Using the issuance and adoption of the current expected credit loss (CECL) standard as an exogenous shock to lenders’ financial reporting, I study the relation between lenders’ financial reporting and debt contracting. I investigate this relation through measuring three aspects of contracting: complexity, restrictive language, and covenant structure. I find that lenders significantly reduce the number of covenants included in their debt contracts following the issuance of CECL, but do not change covenants following the adoption of CECL. Additionally, I find that lenders do not change the complexity or restrictive language after both CECL issuance and adoption. I also find that small borrowers see the greatest reduction in covenant use following CECL. I ensure my findings are not explained by a change in lenders’ screening efforts nor the mechanical result of contract renegotiation. These results imply that CECL reduced lenders’ incentives to monitor due to the early recognition of losses and increased transparency around loan losses.

Research in Progress:

• "Effect of Private Equity Acquisition on Financial Reporting Accuracy: Evidence from the Health Care Industry"

• "Media Ownership and Content Bias" (with Jon Woo)

• "Bank Participation in Dividend Recaps"

• "Non-fundamental Trading around Earnings Announcements"