Working Papers
How Does Leasing Affect Leverage
2021, Job Market Paper
Abstract: Studying leasing’s impact on capital structure has proven challenging in the literature, as corporate leasing policy is 1) difficult to measure and 2) highly endogenous. I address these empirical challenges by 1) developing a novel measure of new lease contracting, and 2) exploiting a Moody’s accounting policy change that made leasing more attractive and resulted in an economically meaningful increase in leasing. Concurrent with this uptick in leasing, I find that secured debt decreased on average. I also find that leasing has a non-negative impact on secured debt capacity. While leasing preserves secured debt capacity across the sample of firms, only high investment opportunity firms use their secured debt capacity to increase secured borrowing. Firms with low investment opportunities, lacking reason to increase aggregate financing, substitute out secured debt when leases increase.
Presented at: UNC Chapel Hill, University of Utah, University of Iowa, Rice, University of Houston, UCLA, Wilfrid Laurier, and Queen’s University
The Distribution of Non-Wage Benefits: Maternity Benefits and Gender Diversity
2019 (with Christos Makridis, Paige Ouimet, and Elena Simintzi) Revise and Resubmit at Review of Financial Studies
Abstract: Why do firms offer non-wage compensation instead of the equivalent amount in financial compensation? We argue that firms use non-wage benefits, specifically maternity leave, to efficiently target workers with desirable characteristics. Using Glassdoor data, we show that firms offer higher quality maternity benefits in industries and locations where female talent is relatively scarce — a relationship robust to an instrumental variable analysis. Second, using plausibly exogenous variation in the timing of government policy, we show that these benefits can increase firm value. Third, we document novel stylized facts about non-wage benefits and how they are correlated with firm characteristics.
Presented at: AFA 2019, Calvacades 2018, SOLE 2018, IZA 2018, and UNC Chapel Hill
Do Credit Ratings Matter? Evidence from S&P’s 2013 Methodology Revision
2019 (with Anil Shivdasani)
Abstract: Exploiting exogenous variation introduced by a significant change in S&P’s methodology, we show that credit ratings have a first-order causal impact on capital structure and investment decisions. Quantifying debt capacity within a firm’s credit rating (Ratings Capacity) using precise metrics, we show that capital structure is highly sensitive to changes in Ratings Capacity. Credit ratings explain more variation in capital structure changes than other firm-specific determinants. Firms with low adjustment costs and attractive investment opportunities are more responsive to Ratings Capacity. Increased Ratings Capacity causes significant expansions in investment and reductions in share repurchases, suggesting wide impacts on financial policy.
Presented at: Ohio State University and UNC Chapel Hill
Tim Liu 