Research

Working Papers

With Matteo Binfare
- Revise and Resubmit at the Journal of Finance
- See the slides

We study the asset allocation and investment performance of U.S. private foundations that support the charitable sector. Large foundations generated positive risk-adjusted returns before 2008, driven by early access to private equity and venture capital funds, but have underperformed since. The median foundation underperforms by more than 100 basis points. Foundations with concentrated stock holdings achieve higher returns but assume more risk. Due to the constraints imposed by the 5% minimum spending rule and accommodating monetary policy, foundations increase risk-taking and reach for yield. Over time, a conservative asset allocation decreases real wealth, reducing charitable giving.

Immigration stimulates economic growth, but it also increases the demand for local public resources. This paper causally examines the impact of immigration on the local government’s access to finance to evaluate this trade-off. I find that immigration inflows improve local government access to finance, as evidenced by a decline in municipal bond yields. I instrument for current immigrants' settlement decisions using historical migration patterns of immigrants from 1880 onward, interacted with the flow of incoming immigrants. These effects are stronger for communities located further from the border and with a higher likelihood of labor shortages. Immigrants of higher education levels provide stronger benefits to the communities they settle in, but even reducing the stock of low-skilled, undocumented immigrants results in increased borrowing costs in the presence of labor shortages. The positive impact of immigration is driven by an expansion in the local labor market which results in long-term increases in profitability for the local government and an enhanced ability to fund collateral. These findings provide evidence of the positive benefits immigrants bring to local communities.

Do private equity (PE) returns rise or fall with fund scale? A causal effect is difficult to identify because better managers can raise larger funds. We develop an instrument using donations to universities. Donations affect fund size because endowments are sensitive to donation income, have sticky relationships with PE managers, and signal fund quality to other Limited Partner investors. We show decreasing returns to scale: a 1% size increase in fund size reduces net IRR by 0.1 percentage points. Larger funds do larger deals, which underperform. We find no change in risk, in part because additional deals are more levered.

This paper studies the effects of a contracting innovation which allows individuals to diversify their labor income risk by sharing labor income above a ceiling into a common pool. I use novel data from professional baseball players to document sign-up correlated with an individual’s level of downside protection and sophistication. Players are significantly more likely to experience an injury before expressing interest in the contract and are drafted in later rounds. I find some evidence of productivity declines following sign-up with an instrumental variables approach built around peer networks confirming these results. Increased monitoring proxied for by players pooling with teammates reduces the likelihood of players experiencing a decline in performance after pooling. Players contract with others of similar ability, backgrounds, and occupations to mitigate information asymmetries.

Bernstein (2015) estimates that innovation quality decreases by 43 percent more post-IPO for firms that successfully go public to firms that file to go public but ultimately withdrawal. I document that 54 percent of this magnitude is attributable to a negative survivorship bias from sample selection. In addition, I find no effect when extending his results to 2012, partially attributable to the decline in relevance of his identification strategy. I document an increase in trademark production for firms with completed IPOs which suggests public firms shift their innovative focus towards commercialization. These results cast doubt on the adverse effects of going public on innovation and the recent IPO literature that instruments for IPO completion using the post-filing returns on the Nasdaq stock index.

"The Role of Debt in Financing Higher Education", 2024, NBER: Financing Institutions of Higher Education