Research Statement
My recent work studies how a firm’s ownership structure shapes competition in the product market.
Firm owners include both equityholders and debtholders. Equity ownership may be independent or shared across rival firms through common owners. Similarly, debt ownership may be held by independent lenders or shared through common lenders. My work examines how changes in firms’ ownership structure – across debt and equity, whether held commonly or independently held – affect firms’ competitive behavior and real product-market outcomes.
When a firm’s ownership tilts toward debt, and the firm operates under bankruptcy court protection, my research examines whether Chapter 11 protections grant persistent competitive advantages for the bankrupt firm, in terms of both pricing behavior and changes in production technology that may affect product quality. I also ask whether solvent product-market rivals respond aggressively to drive insolvent firm out of the market. Relatedly, I examine whether financially distressed firms, kept out of bankruptcy through subsidized bank lending (“zombie” firms), generate congestion in the product market that ultimately crowds out healthier competitors.
When a firm’s ownership structure tilts toward commonly held debt, or commonly held equity, my research studies whether the common holders induce less aggressive competition, to increase firm profits and, in the case of debt, also protect loan repayment.
This line of research attracted substantial attention and gained significant impact among both academics and public policy antitrust regulators, in the United States and abroad. I presented my work at leading scholarly conferences, including the North America Econometric Society, the American Finance Association, the Western Finance Association, the European Finance Association, and the Financial Intermediation Research Society. I was invited to serve as the keynote speaker at The Brigham Young University Law School, Antitrust Conference. I was invited to prepare a review article for the Annual Review of Financial Economics. One of my papers in this area, published in the Journal of Finance, received the Best Conference Paper Award by the European Financial Association and has received over 200 cites since 2023, including citations in top Econ journals such as Econometrica and the JPE and all three top finance journals.
My research has influenced public policy both in the United States and abroad. My work on common ownership informs ongoing antitrust proposals that would restrict institutional investors from holding equity stakes in competing firms. These proposals have far-reaching economic consequences, limiting asset managers’ ability to construct diversified portfolios, increasing costs for individual investors, and raising monitoring and enforcement burdens for regulators and investment funds. My work directly informs this debate providing rigorous empirical evidence that common equity ownership does not generate anticompetitive effects. I was recently interviewed by the Chief Economist Staffer for the United States House Committee on the Judiciary and subsequently asked to serve as an expert witness before the United States House of Representative’s Judiciary Committee on Antitrust. My work has been cited by Federal Trade Commission Commissioner in a public address, and by U.S. Department of Justice Antitrust Division, the Securities Industry and Financial Markets Association, United Kingdom’s Competition and Markets Authority and the European Commission. My work on debt ownership and bankruptcy also attracted attention form U.S. regulators and has been presented at the U.S. Department of Justice Antitrust Division. My work on ownership and incentives was cited by the SEC Commissioner in her 2021 keynote addresses to the Society for Corporate Governance National Conference.
I am publicly recognized as an expert on airline competition, with citations in the Financial Times, The Economist, and Bloomberg, and interviews on NPR’s Marketplace with K. Rysdall and Morning Report with D. Brancaccio.
My earlier research examines capital structure choices and asymmetric information issues affecting firms’ costs of debt and equity capital. This body of work also has substantial impact in both academic and public policy circles, in the United States and abroad. This work includes two sole authored papers; one published in the Journal of Finance (Brattle Prize Nominee) and one in the Review of Financial Studies. Together, these papers have over 850 citations. I presented it at the Western Finance Association, and in policy institutions, including the Federal Reserve Board, Federal Reserve Banks of New York and Chicago, and the Securities and Exchange Commission.
This research continues to be influential in academic scholarship, as reflected in recent citations in leading finance and economics journals, including the Journal of Political Economy (2024), the Journal of Law and Economics (2023), the Journal of Finance (2025, twice), the Review of Financial Studies (2022, 2024), and the Journal of Financial Economics (2020, 2022) among others. Beyond academia, my work continues to inform informed policy analysis, as revealed by recent citations by several central banks, including the Swedish Central Bank (2020), the Norwegian Central Bank (2021, 2025), the European Central Bank (2021), Banque de France (2023), and Banca d’Italia (2019).
This statement outlines my two broad research contributions. Within each area, I describe the relevant papers grouped by topic. The focus of this statement is on my most recent work.
Ownership Structure, Managerial Incentives, and Product Market Competition
Common equity ownership arises when investors hold equity stakes in multiple firms competing in the same product market. This ownership structure has become increasingly prevalent as institutional investors’ share of publicly traded U.S. equity has grown, reaching about 69% by 2024. This trend drew significant attention from researchers and policymakers, questioning whether common equity owners mandate managers of rival firms in their portfolios to soften competition. Calls for antitrust legislation ensued, including restrictions on stock acquisitions by institutional investors.
My work gets at the heart of this debate showing that claims of anticompetitive behavior by common owners are based on questionable and unrealistic assumptions, both theoretically and empirically.
My first contribution econometrically shows that the documented positive correlation between common ownership and prices is an artifact of the common ownership measure, a nonlinear function of each firm’s market share and the institutional investors’ control and cash-flow rights in the firm. In Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry (with Dennis and Gerardi, The Journal of Finance, 2022) we prove it is the market share component of the common ownership measure, and not the ownership and control components, that drives the correlation between prices and common ownership. We implement a placebo analysis constructing two alternative measures of common ownership. The first, mutes time-series variation in ownership and control retaining true market shares. The second, mutes the time-series variation in market shares and retains true ownership and control. We find that the first measure is positively correlated with prices whereas the second is not. These results indicate that it is variation in market shares, not in ownership or control, that drives the correlation between the common ownership and prices. We also show that prior evidence is sensitive to measures of investor control, and to assumptions about equity holders’ ownership and control during bankruptcy. Our work was challenged by Azar et al. (2022); and in “A Surrebuttal: There Are No Anti-Competitive Effects of Common Ownership in the Airline Industry” (with Dennis and Gerardi, 2022) we lay this critique to rest. In Revisiting the Effect of Common Ownership on Pricing in the Airline Industry, (with Dennis and Gerardi, Harvard Law School Forum on Corporate Governance, 2022), we discuss policy to limit common ownership and caution against it.
Proponents of the anti-competitive effects of common ownership argue that softer competition arises because owners rely less on incentive-based compensation, allowing managers to “enjoy the quiet life,” thus disengaging from aggressive product market competition. My research shows that this characterization is inconsistent with how owners in general actually behave. To do this I examine incentive based compensation in the airline industry. This setting is well suited to studying incentives as observed on-time arrival is closely linked to managerial actions targeted by the incentive, limiting noise between incentive, action, and outcome (unlike most of the literature on managerial incentives which focuses on stock and option grants and examines performance measures such as stock or accounting returns). Further, the introduction of on-time incentive bonuses is staggered in time across airlines, allowing us to identify the effects of incentives on firms receiving the incentive, and on product market rivals not receiving it. In “Incentives and Competition in the Airline Industry” (with R. Aggarwal, Review of Corporate Finance Studies, 2019) we first show that airline owners actively motivate managers through performance-based incentives. Next, through various difference in difference analysis, we consistently find that airlines reduce the length and frequency of arrival delays following the of on-time bonuses, and though we find some degree of strategic gaming (airlines adjust scheduled flight times) we find that most of the on-time arrival improvement is driven by on-time departures. Importantly, rivals that do not adopt on-time incentives improve on-time performance on routes where they compete with carries that have such incentives, suggesting that competition in quality is competition in strategic complements, and so, an on-time arrival incentive causes both the initiating firm and its rivals to increase consumer surplus. These findings demonstrate that owners motivate managers and that managerial incentives intensify, rather than soften, product-market competition. This evidence is inconsistent with the common equity ownership hypothesis that managers disengage from competition to enjoy a “quiet life.”
I continue to explore managerial incentives and behavior underlying the common ownership hypothesis in “A Critical Review of the Common Ownership Literature (with Gerardi and Lowry, Annual Review of Financial Economics, 2024). Here we explore the theoretical foundations of the common ownership hypothesis and highlight that these theories rely on assumptions on managerial incentives and information that are inconsistent with standard economic theory and are contradictory with observed managerial contracts. They assume managers know and execute shareholders’ preferences, yet managers cannot feasibly know—much less implement—the preferences of a large and diverse pool of investors. Precisely for this, managers are given a simple mandate, maximize firm profits and shareholder value, and we observe managerial contracts explicitly designed to motivate managers to achieve this objective. Further, even if managers observed investor preferences, no coherent mechanism exists to aggregate and implement them, a point formalized by the Condorcet Paradox and Arrow’s Impossibility Theorem. In this paper, we also assess the proposed mechanisms through which common ownership could causally affect competition, and argue direct communication is implausible given antitrust constraints, and indirect mechanisms (claiming softer competition results from lower incentive-based compensation) violate incentive compatibility criteria, as firms with greater agency costs are likely to attract activist investor attention, and are likely takeover targets, making the “quiet life” equilibrium unstable. We also review the empirical literature, highlight key measurement and identification challenges, and conclude that studies using credible identification strategies find little evidence that common ownership reduces competition.
In ongoing work, I shift the attention from common equity ownership to common debt ownership. The banking industry in the United States has consolidated considerably over the last few decades following a wave of mergers. After the financial upheaval in 2008, the top five banks held approximately one-third of the total volume of loans outstanding in the syndicated-loan market. As the credit market becomes more concentrated, it is increasingly likely that a bank engages in lending relationships with firms that are rivals in the same product market. Could a bank that simultaneously lends to firms that compete in the same product market act as a coordinating device across its borrowers to implicitly or explicitly promote softer competition between rivals? We explore the product market consequences of rival firms sharing a common lender in “Common Lenders and Pricing Strategies in the Airline Industry,” with Mehdi Beyhagui, Kris Gerardi and Farzad Saidi.
While common equity owners are unlikely to have a direct impact on managerial decisions, lenders can influence the operations and actions of their borrowers, especially in states of bankruptcy, when control is explicitly transferred to debtholders, or even outside of bankruptcy when their borrowers approach the zone of insolvency. Further, in their role as monitors, banks acquire proprietary firm-specific information that not only includes hard data on operating performance, profitability and financial strength, but also valuable soft information that is qualitative in nature, not easily acquired or transferable. Equipped with this information from competing rivals, banks are in a unique position to act as a coordinating device inducing a more collaborative interaction among rivals. One mechanism enhancing the lenders' means to influence borrowers' operations is their ability to demand adherence to loan terms and covenants. Lastly, they have the ability and power to discipline borrowers who might deviate from desired interaction, by recalling loans or making negotiations harder.
Using airline data and loan data from Dealscan for the period 1993- 2024 period, we find that airline ticket prices are approximately 4 percent higher in markets where all carriers share a common lender compared to markets where none do. We are now working with highly confidential data from the Federal Reserve Board’s (FRB) Shared National Credit Report (SNC) to improve the quality of the loan data.
Regardless of whether debt is commonly held, ownership shifts toward debtholders when firms become insolvent and file for Chapter 11 bankruptcy. Under bankruptcy court protection, firms may—with court approval—assume, reject, or modify key obligations such as leases, fuel contracts, labor agreements, and pension commitments. These leeways raise an important question for product-market competition: whether they confer a competitive advantage by enabling insolvent firms to more easily restructure their operating costs.
This advantage could impact the pricing and quality of the services or products the insolvent firm offers. I examine this issue in two papers joint with Federico Ciliberto.
In “Bankruptcy and Product-Market Competition: Evidence from the Airline Industry” (International Journal of Industrial Organization, 2012), we show that Chapter 11 filings have large and persistent effects on competitive behavior. Bankrupt carriers substantially contract their networks, flight frequency, and capacity, during and after bankruptcy, consistent with long- term reduction in fixed costs. These changes, however, are accompanied by declines in passengers per seat, indicating a reduction in demand for bankrupt firms’ services alongside fixed costs adjustment. We also examine changes in marginal costs and ticket price. We also examine changes in marginal costs and ticket prices. We find that insolvent firms lower prices during bankruptcy but raise them upon exiting bankruptcy. Overall, the observed capacity reductions, pricing dynamics around bankruptcy, and lack of evidence of changes in the marginal cost of transporting a passenger indicate that bankruptcy filings are effective at reducing fixed costs, but not marginal costs. Our results do not support the view that operating under bankruptcy protection systematically confers insolvent firms a persistent pricing advantage relative to solvent rivals.
In “Are the Bankrupt Skies the Friendliest?” (The Journal of Corporate Finance, 2012) I shift attention from product pricing to product quality effects of bankruptcy. The airline industry provides objective measures of service quality: cancellations, delays, and aircraft age. I find that delays and cancellations are less frequent during bankruptcy but return to pre-bankruptcy levels after exiting bankruptcy. I also find that bankrupt firms reorganize their aircraft fleet, significantly reducing the average fleet age. While improvements in service quality during bankruptcy may appear counterintuitive, they are consistent with bankrupt firms’ ability to reject leases and reallocate resources toward more efficient production technologies.
While many financially distressed firms reorganize under Chapter 11 or exit through liquidation, some—referred to as “zombies”—remain outside bankruptcy receiving subsidized loans from their lenders. In ongoing work, “Competitive Effects of Zombie Firms” (with Kevin Aretz), we study product-market competition in the presence zombie firms. The concern is that these firms create congestion in product markets: rather than reorganizing or exiting, they remain active, absorbing resources that could otherwise be reallocated to more efficient firms. Consistent with prior literature, we find that zombified markets experience price deflation. We further show that healthy airlines respond to the presence of zombies by lowering prices aggressively, while also improving service quality. Healthy firms, however, do not benefit in the long run, as we show significantly higher exit rates among healthy carriers on routes with zombie competitors.
Capital Structure and Asymmetric Information
This area of research was the focus of most of my earlier work. It examines capital structure choices and asymmetric information issues that affect firms’ costs of debt and equity capital.
In “The Effect of Banking Relations on the Firm’s IPO Underpricing”, The Journal of Finance (2004), a Brattle Prize Nominee for the most outstanding Journal of Finance paper in Corporate Finance, I investigate how firms’ pre-IPO lending relationships impact their ability to raise equity capital in the IPO. In Lending Relationships and Information Rents: Do Banks Exploit their Information Advantage? The Review of Financial Studies, (2010) I explore how the IPO process can serve as an information releasing event that lowers the issuing firm’s cost of switching lenders, allowing the firm to lower borrowing costs. Finally, in Conflict of Interest and Certification: Long-Term Performance and Valuation of U.S. IPOs Underwritten by Relationship Banks (with Luca Benzoni) The Journal of Financial Intermediation (2010), we examine whether pre-IPO lender fall prey of conflicts of interest or act as certifiers of the issue, and find evidence supporting the certification role.
In recent work, Investment Banking Relationships: 1933-2009 (with Morrison, Thegeya, and Wilhelm, The Review of Corporate Finance Studies (2018), I extend this agenda from lending to investment banking relationships, studying their evolution over much of the twentieth century. This research documents how deregulation and increased competition have transformed the role of investment banks and shows that strong issuer–underwriter relationships reduce underwriting costs and improve transaction outcomes.