About me

I am an Assistant Professor of Finance at the SC Johnson Cornell College of Business. My research interests are in empirical corporate finance and public finance, with a focus on financial intermediation, sustainability, and municipal debt markets. I earned my PhD in finance from the University of Chicago Booth School of Business. My last name is pronounced “Pose-now”.

Research

Working papers

"Debt and Water: State-Contingent Creditor Influence in Local Government " (new draft!)


[+]Abstract

This paper asks whether creditor influence through municipal debt contracts affects local government operations. Using a new panel of California local-government water utilities that links financial reports and operating outcomes to hand-collected revenue-bond rate covenants, I show that these covenants matter outside of payment default. During California’s exceptional drought, utilities closer to covenant thresholds mitigated drought-driven revenue losses by raising operating revenues. In more tax-resistant communities, covenant-constrained utilities responded by cutting spending, primarily on the water system. Across utilities, covenant-constrained utilities in the most drought-exposed areas report more post-drought system problems, including pipe breaks and water outages.

"The Impact of the Shadow Banking Sector on Public Finance"
with Chuck Boyer

[+]Abstract

Prior to 2016, money market mutual funds held about $250 billion in municipal government debt. These funds were an important source of short-term and low cost financing for state and local governments as well as other municipal entities in the United States. In response to the financial crisis of 2008, the SEC implemented a series of reforms in 2016 designed to make these funds more stable. We study the effects of the reforms on the U.S. municipal debt market. We use the negative shock to demand to explore the effects of frictions and asset-specific demand in this market. We show that tax-exempt fund holdings of municipal debt dropped precipitously around implementation of the reform. Issuers more exposed to the reform experienced a decrease in lending from funds, an increase in borrowing costs from funds, and an overall increase in borrowing costs for all new municipal debt issues. Our results suggest the reform may have increased borrowing costs for municipal entities that were more reliant on money markets for funding, and the effects were larger for smaller issuers. Our results demonstrate the importance of financial intermediaries, potential information frictions, and asset specific demand for municipal markets.

"Liquidity Regulation and Investor Demand for Safe Assets"
(Available upon request)

[+]Abstract

Can banking regulation induce convenience yields? Not always. I study how a 2016 change in the Federal Reserve's Liquidity Coverage Ratio (LCR) that allowed banks to hold certain types of municipal securities as high quality liquid assets (HQLA) affected secondary market yields for these securities. I exploit two institutional features to identify the effect of the regulation on bank demand in a differences-in-differences design: first, banks are marginal investors only in one segment of the municipal bond market, the bank-qualified segment; second, the LCR differentially treated only certain types of municipal securities as HQLA. I find no significant pricing effects around the implementation date and little change in covered banking organization holdings of municipal securities. I conclude that the HQLA designation is not enough to create a safe asset: haircuts and exclusion limits affect whether regulatory assets command convenience yields.

Publications

"The Risk and Return of Impact Investing Funds"
with Jessica Jeffers and Tianshu Lyu (Journal of Financial Economics, 2024).

[+]Abstract

We provide the first analysis of the risk exposure and risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a dataset of impact fund cash flows and exploit distortions in VC performance measures to characterize risk profiles. Impact funds have a lower market β than comparable private market strategies. Accounting for β, impact funds underperform the public market, though not more so than comparable strategies. We consider alternative pricing models, accounting for sustainability and emerging markets risk. We show investors’ wealth portfolios and taste change the perceived financial merit of impact investing.

"The Anatomy of Financial Vulnerabilities and Banking Crises"
with Seung Jung Lee and Viktors Stebunovs (Journal of Banking and Finance, 2020).

[+]Abstract

We extend the framework of Aikman et al. (2017) that maps vulnerabilities in the U.S. financial system to a broader set of financial vulnerabilities in 27 advanced and emerging economies. We capture a holistic view of the evolution of financial vulnerabilities before and after a banking crisis. We find that, before a banking crisis, pressures in asset valuations materialize first and then a build-up of imbalances in the external, financial, and nonfinancial sectors occurs. After a crisis, these vulnerabilities subside, but sovereign debt imbalances rise as governments try to mitigate the consequences of the crisis. Our main indexes, which aggregate these vulnerabilities, predicts banking crises better than the credit-to-GDP gap (CGG) or sector-specific vulnerability indexes, especially at long horizons. Our aggregate indexes also explain the variation in the severity of banking crises and the duration of recessions relatively well, as it incorporates possible spillover and amplification channels of financial vulnerabilities from one sector to another. Therefore, our framework is useful for macroprudential policy making and crisis management.