Research

Working Papers

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

We study the asset allocation, spending behavior, fees, and investment performance of U.S. private foundations. We find that large foundations generate positive risk-adjusted returns of about one percent per year. Larger and more sophisticated foundations perform better and invest more aggressively. Foundations with concentrated stock holdings have higher returns but also take on more risk. Because of the constraints imposed by the five percent minimum spending rule and accommodating monetary policy, private foundations increase their risk-taking and reach for yield. Due to these constraints, a conservative asset allocation will decrease real wealth over time resulting in less charitable giving.

"Should They Stay or Should They Go? Immigration and Municipal Bonds"
- Selected for Dual Submission at the Journal of Financial Economics
- See the slides

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. I find similar effects using the staggered adoption of the Secure Communities Act which increased the likelihood of detainment for undocumented immigrants. These effects are stronger for communities located further from the border, with higher operating margins, and with older demographics. Immigrants of higher education levels provide stronger benefits to the communities they settle in. The positive impact of immigration is driven by an expansion in the local labor market and an enhanced ability to fund collateral, rather than economies of scale. These findings provide evidence of the positive benefits immigrants bring to local communities.

As the private equity sector has grown more concentrated—with a few firms raising increasingly large funds—a longstanding debate about whether there are increasing or decreasing returns to fund scale in private equity has become more urgent. We conduct the first causal study, exploiting gifts to private universities as an instrument for subsequent fund size, making use of funds' heterogeneous exposure to donation inflows based on preexisting relationships. We find that a 1% increase in fund size reduces a fund’s net IRR by 0.1 percentage points. We do not find evidence for a number of obvious channels, such as doing more deals or a team that is ``stretched thin." Instead, increasing fund size leads managers to do larger deals, which in turn do not perform as well. We find no change in deal or fund risk, in part because additional deals are more highly 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