Conference Agenda

In the presence of limited contract enforcement, borrowers might be unable to commit to repay their debt or avoid actions that hurt creditors' interest after borrowing, e.g., borrowers can have incentives to renegotiate their debt. This lack of commitment can reduce firms' ability to borrow in the first place. In this paper, I provide evidence of the theoretical insight that dispersed creditors can help address this commitment problem in debt markets. Intuitively, dispersed creditors face coordination problems that make defaults and renegotiations costly, improving debtors' incentives to repay and avoid such delinquency events. I study this idea by analyzing its implications for bankruptcy or reorganization law. Legal reforms that facilitate creditor coordination and renegotiation can reduce the ex-post costs of financial distress. However, by facilitating creditor coordination, these reforms can also limit borrowers' ability to commit and borrow using creditor dispersion. I label this effect as the commitment channel and study its importance using a unique reform in Korea, which only affects how creditors make collective decisions (creditor voting rules in private workouts). I isolate the commitment channel by contrasting firms based on their exposure to this channel. To guide this analysis, I present a theoretical framework predicting which firms should rely more on creditor dispersion for commitment and, thus, be more affected by the commitment channel. Using hand-collected data on firm-creditor relationships, I show that firms with high exposure to the commitment channel experience a significant decrease in their borrowing and rely less on creditor dispersion after the reform. Moreover, consistent with the view that these issues are less relevant when creditors are protected by asset liquidations, these effects are concentrated among firms lacking easy-to-liquidate assets. The analysis highlights the role of creditor dispersion as a commitment device even in a legal system with strong creditor protection, such as Korea. My findings also suggest how reforms designed to improve ex-post efficiency in financial distress, a main goal of reorganization law in many countries (e.g., Chapter 11 in the U.S.), can have negative ex-ante effects on the ability of many firms to raise debt financing.

The market power of data sellers is a topic of concern for policymakers. To measure market power, economists typically examine markups, which are price divided by marginal cost. For many data products, the marginal cost is zero, making the markup infinite. We explore what observable variables are indicative of market power in a data market. While most data sellers have a monopoly for their exact data set, they also cannot commit not to sell data to other customers. We find that limited commitment, combined with the fact that data's strategic value declines in the number of users, makes data sellers behave more competitively. Monopolist data sellers do not have much monopoly power, but data subscription sellers do. Using evidence from online data markets, we explore firms' use of sales and subscriptions, test the model's predictions and then quantify the model to determine what is best for consumer surplus. We find that data subscriptions are indicative of market power, but are also better for consumers, because they create an incentive to invest in high-quality data.

For many firms, the acquisition process begins with the development of an acquisition plan that is communicated to investors. We construct a comprehensive sample of acquisition plans to provide novel perspectives on the acquisition process and find that acquisition plans are informative to investors and incrementally predict subsequent acquisition activity. These results are more pronounced for firms announcing their commitment to acquisitions from an internal pipeline. Acquisition plans improve acquisition performance due to learning from market feedback and alleviate acquisition-related investor uncertainties. Communication of acquisition plans does not increase takeover premiums but is less common in more competitive industries.