Rusi Yan

Date of Award

Spring 5-15-2023

Author's School

Graduate School of Arts and Sciences

Author's Department

Economics

Degree Name

Doctor of Philosophy (PhD)

Degree Type

Dissertation

Abstract

Debt Contracts, Outside Equity and Financial Development: How important are different financial contracts for economic development? Using cross-country firm-level data, I document the extensive usage of alternative debt contracts and ownership structure patterns for public firms. At the aggregate level, development in each segment of the financial system is significantly linked to GDP per capita and wealth inequality. To quantify the aggregate consequences, I develop a heterogeneous agent model of entrepreneurs who face asset-based or cash flow-based debt and outside equity frictions. The model is calibrated to a large set of countries in vastly different stages of financial development. Quantitatively, with asset-based debt (cash flow-based debt), reducing debt frictions in the low debt low equity country group to the average level of the high debt high equity benchmark group raises output per capita by 20.2% (8.3%), compared to a 5.7% (6.5%) increase when reducing equity frictions.

Social Media Attention, Stock Returns and Retail Trades: The rise of social media and retail trading platforms has potentially changed the importance of retail investors in the stock market. Using data from Reddit WallStreetBets, we examine the market consequences of abnormal social media attention and its relationship with retail investor trading activities. We find that high social media attention on Reddit is associated with higher retail trading activities, cumulative returns and price informativeness. When social media attention occurs in conjunction with earnings announcements, social media attention increases the diffusion of information among retail investors, as reflected in discussion tones, directional retail trading, and price informativeness measure. While Reddit helps spread information to the general retail population, investors on Robinhood exhibit opposite trading directions, consistent with previous studies that Robinhood investors are relatively inexperienced. Our findings suggest that high social media attention affects stock returns through diffusion of information to retail investors.

Uncovering Frictions to Long-Term Borrowing: Firms with higher leverage and shorter debt maturity contract more in investment after the financial shock. Why firms choose short maturities? We develop a tractable quantitative model of firm's optimal leverage and debt maturity choice in an environment with interest rate shocks and financial frictions. Firms have access to short- and long-term investment opportunities. Long-term debt is employed to hedge the interest rate risk rising from long-term investment projects. We utilize the model to disentangle the quantitative importance of heterogeneity in short-term interest rate dispersion from the lender side to heterogeneity in term premium wedges from the borrower side in accounting for the maturity choices. Absent heterogeneity in borrower term premium, the ex ante heterogeneity from the lender side can not quantitatively reproduce the empirical pattern, suggesting a large role for borrower heterogeneity.

Language

English (en)

Chair and Committee

Francisco J. Buera

Committee Members

Ana Babus, Julian Kozlowski, Yongseok Shin, Ping Wang,

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