Conference Agenda

We study how risk management through hedging impacts firms and competition among firms in the life insurance industry - an industry with over 7 Trillion in assets and over 1,000 private and public firms. We examine firms after a staggered state-level reform that reduces the costs of hedging by granting derivatives superpriority in case of insolvency. We show that firms that are likely to face costly external finance increase hedging and reduce risk and the probability of receivership. Firms that are likely to face costly external finance, also lower prices, increase policy sales and increase their market share post reform.

Nonprofit banks in the U.S. are primarily organized as credit unions (CUs) and have grown steadily over the last two decades, increasing their share of total lending to U.S. households. This paper studies the economic effects of banking with CUs using consumer credit report data merged to administrative data on originated mortgages and detailed data on the locations and balance sheets of CUs. To estimate causal effects, I construct a novel instrument for banking with a CU using a distance-weighted density measure of nearby CUs. I find that banking with a CU causes borrowers to have fewer mortgage delinquencies, higher credit scores, and a lower risk of bankruptcy several years later. I find support for several mechanisms behind these results: CUs charge lower interest rates, price in less risk-sensitive ways, are less likely to resell their originated mortgages in the secondary market, and are more likely to accommodate borrowers that become past due. These results suggest that CUs behave differently than for-profit banks, that many consumers experience different outcomes by banking with CUs, and are inconsistent with CUs behaving as ``for-profits in disguise."

Real-world contractual agreements between firms are often incomplete, leading to suboptimal investment and loss of value in supply-chain relationships. To what extent can blockchain technology help alleviate problems arising from contractual incompleteness? We examine this issue by exploiting a quasi-natural experiment based on the staggered adoption of U.S. state laws that increased firms’ in-state ability to develop, adopt, and use blockchain technology. We find that, after exposure to a pro-blockchain law, firms with greater asset specificity exhibit more positive changes to Tobin’s Q, R&D, and blockchain-related innovation. Also, such firms appear to rely less on vertical integration, form more strategic alliances, and shift their emphasis to less geographically proximate customers. Overall, our results suggest that blockchain technology can help firms remedy constraints and inefficiencies arising from contractual incompleteness.