Research

• Why Venture Later? Incentives, Learning, and Industry Allocation in VC Funds (Job Market Paper) [Latest Version]

Abstract: Why do private equity firms often delay investment in high-uncertainty sectors like deep tech, despite their potential for long-term gains? This paper examines how agency frictions shape cross-industry portfolio allocation decisions. I develop a dynamic model in which limited partners cannot observe fund managers’ effort to explore, and fund managers cannot fully monitor entrepreneurs’ experimental designs. These two layers of moral hazard reduce incentives for early exploration and distort capital commitments across funds. The model predicts that firms with high opportunity costs are more likely to specialize, while even low-cost firms underinvest in exploration when frictions are severe. Empirical evidence from matched fund-level data confirms these predictions, showing that higher moral hazard is associated with reduced exploratory investment in earlier funds and lower follow-on capital in subsequent funds.

• Working Papers

• • Breaching the Chinese Wall: Cross-Market Information Flow Following Financial Institution Mergers [SSRN]

with Navid Akbaripour (Stockholm School of Economics)

Abstract: To what extent and how does access to private loan information influence institutional investors' equity returns? Utilizing data from mergers between equity and debt holders, we show that institutional investors realize a 3.1% higher annualized abnormal return in stocks where they also own debt. These investors earn a significant 1.7% higher equity return than institutions holding only equity in the same firms, consistent with debt holdings providing access to information unavailable to shareholders. The existence of private information covenants in loan agreements before mergers further boosts returns by approximately 2%. Moreover, our findings indicate that firms ending up with a single entity holding both debt and equity after a merger are 11% to 17% more likely to incorporate specific private information covenants into their loan agreements, highlighting the strategic use of private information in financial contracts post-merger.

• The Agency Cost of Debt and Innovation [Latest Version]

Abstract: This paper isolates the effect of the agency cost of debt on the firm’s innovative activities. I use the presence of debtholders who also own equity in the firm as a proxy to measure this agency cost. I find that firms with reduced agency costs engage in fewer innovative projects relative to their peers. At the same time, these firms receive 12% more total future citations to their patents, and the average market value of their patents is also 7% higher. I argue that the reduction in the level of the firm’s business risk and the following reallocation of internal funds is the likely channel behind these effects.

• Work in Progress

• Index-based Investing in Europe

with Bo Becker (SSE, ECGI & CEPR) and Rüdiger Fahlenbrach (EPFL, ECGI & CEPR)

• Who is (not) Taking Green Loans?

with Navid Akbaripour (SSE), Marieke Bos (SSE, CEPR, VU Amsterdam, Tinbergen Institute), and Arna Olafsson (CBS, CEPR)