Published Papers on Corporate Finance and
​Product Market Competition
Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry
​(with Patrick Dennis, and Kristopher Gerardi).
The Journal of Finance, October 2022, 7(5), 2765-2798
European Finance Association Award for Best Overall Paper, EFA Meeting 2018
Link to SSRN
​Institutions often own equity in multiple firms that compete in the same product market. These institutional “common owners” may induce or mandate anti-competitive pricing behavior among product market rivals. This paper evaluates prior evidence of such behavior between competing airlines. The measure of common ownership used is a function of each airline’s market share, as well as the control and cash flow rights held by the institutions that own the airlines that compete in the same market. We show that the documented positive correlation between common ownership and ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We examine other econometric and data measurement issues and show that the previously documented results are sensitive to alternative measures of investor control, as well as alternative assumptions about equity holders’ ownership and control during bankruptcy.
Some media mentions:
A Critical Review of the Common Ownership Literature
(with Kristopher Gerardi and Michelle Lowry).

Annual Review of Financial Economics, forthcoming 2024.
Link to SSRN
​The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers.  A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policymakers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. This article overviews the theoretical underpinnings of common ownership and critically reviews the empirical literature.  Measurement issues and identification challenges are detailed and a discussion of plausible causal mechanisms is provided. Across the newest papers employing the most credible identification techniques, there is relatively little evidence that common ownership causes lower competition. However further research is necessary before broad conclusions can be reached.
Incentives and Competition in the Airline Industry
(with Raj Aggarwal).
​The Review of Corporate Finance Studies, 2019, Vol. 8 (2), 380-428.
​Link to RCFS
​We examine how performance changes at airlines in response to a change in executive incentives. Airlines with executive bonuses contingent on on-time arrival do improve on-time performance. We find evidence of strategic gaming of the incentive as some carriers increase scheduled flight times, making it easier for flights to arrive on-time. This effect is more pronounced on competitive routes. Carriers also do not decrease the frequency of flights or the number of passengers to make it easier to be on-time, but they do slightly decrease fares. Competitors on the same routes also improve their on-time performance, even when their executive bonuses are not contingent on on-time performance, consistent with competition in strategic complements.
Bankruptcy and Product-Market Competition: Evidence from the Airline Industry
(with Federico Ciliberto).
The International Journal of Industrial Organization, November 2012, Vol. 30, Issue 6, 564–577.
Link to IJIO
We investigate the effects of Chapter 11 bankruptcy filings on product market competition using data from the US airline industry. We find: i) bankrupt airlines permanently downsize their national route structure, their airport-specific networks, and their route-specific flight frequency and capacity; ii) bankrupt airlines lower their route-specific prices while under bankruptcy protection, and increase them after emerging. We do not find robust evidence of significant changes by the bankrupt airline’s
competitors along any of the dimensions above.
​Are the Bankrupt Skies the Friendliest?
​(with Federico Ciliberto).
The Journal of Corporate Finance, July 2012, Vol. 18, 1217-1231.
Link to JCF
We use data from the US airline industry to investigate whether firms that are under bankruptcy protection, as well as these firm’s product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier using flight cancellations and delays, and the age of the aircraft used by the carrier. We find that delays and cancelations are less frequent during bankruptcy filings but return to their pre-bankruptcy levels once the bankrupt firm emerges from bankruptcy. We also find that firms use Chapter 11 filings to permanently reduce the age of their fleet. We do not find evidence of statistically and economically significant changes by the airline’s competitors along any of the dimensions above.
Some media mentions:
Published ​Papers on Corporate Finance and Banking
Investment Banking Relationships: 1933-2009
(with Alan Morrison, Aaron Thegeya, and Bill Wilhelm)
The Review of Corporate Finance Studies, Vol. 7, Issue 2, Sept. 2018, 194–244.
Link
We study the evolution of investment-banking relationships from 1933 to 2007. Relationship exclusivity and client concerns for the state of their banking relationships were strong through the first part of our sample period but then entered a period of sharp decline beginning around 1970. We interpret the bank-client relationship as an informal governance mechanism for curbing opportunistic behavior in a weak contracting environment and examine how technological change aggravated conflicts of interest within investment banks and between banks and their clients. This perspective sheds light on why trust between banks and their clients now appears to be in short supply.
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, April 2010, Vol. 19, No. 2, 235-254.
Link
We examine the long-term return performance of U.S. IPOs underwritten by relationship banks. We show that, over one- to three-year horizons, IPOs managed by relationship banks experience buy-andhold benchmark-adjusted returns that are similar to those observed for a matching sample of stocks managed by non-relationship underwriters. This result holds even when the returns’ skewness and cross-sectional correlation is accounted for. Further, we examine the calendar-time returns on a portfolio that is long the stocks underwritten by relationship banks and short ex-ante similar stocks taken public by non-relationship institutions. Again, we conclude that the two groups of IPOs yield similar long-run returns. These findings support the certification role of relationship banks and suggest that, in this respect, the effect of the 1999 repeal of Sections 20 and 32 of the Glass–Steagall Act has not been negative.
Lending Relationships and Information Rents: Do Banks Exploit their Information Advantage?
The Review of Financial Studies, March 2010, Vol. 23, No. 3, 1149-1199.
Link
​In the process of lending to a firm, a bank acquires proprietary firm-specific information that is unavailable to non-lenders. This asymmetric evolution of information between lenders and prospective lenders grants the former an information monopoly. This article empirically investigates whether relationship banks exploit this advantage by charging higher interest rates than those that would prevail were all banks symmetrically informed. My identification strategy hinges on the notion that large information shocks that level the playing field among banks erode the relationship bank’s information monopoly. I use the borrower’s initial public offering (IPO) as such an information releasing event, and build a panel dataset in which the unit of observation is a firm’s lending relationships before and after its IPO. Prior to a firm’s IPO, I find a U-shaped relation between borrowing rates and relationship intensity. After the IPO, interest rates are decreasing in relationship intensity. Furthermore, mean interest rates drop after an IPO. The results are robust to firm and loan-year fixed effects, and to controls for firm leverage pre- and post-IPO. Thus, the reported interest rate pattern is clean of any confounding effects that might arise from changes in financial risk.
The Effect of Banking Relations on the Firm’s IPO Underpricing.
The Journal of Finance, December 2004, Vol. 60, No. 6, 2903-2958.
Link
This paper investigates the effects of pre-IPO banking relationships on a firm’s IPO. Using a new and unique data set, which compares the firm’s pre-IPO banking relationships to the underwriters managing the firm’s new issue, I test whether banking relationships established before the firm’s IPO ameliorate asymmetric information problems behind high IPO underpricing. The results show that firms with a pre-IPO banking relationship with a prospective underwriter face about 17% lower underpricing than firms without such banking relationships. These results are robust to controlling for the firm’s endogenous selection of the pre-IPO banking institution.
Working Papers
A Surrebuttal: There Are No Anti-Competitive Effects of Common Ownership in the Airline Industry (with Patrick J. Dennis and Kristopher Gerardi).
December 2022
The influential paper by Azar et al. (2018) presents empirical evidence from the airline industry that institutional investors who own shares in firms that are product-market rivals leads to anti-competitive behavior and higher prices. Dennis et al. (2022) refute this contention and show using a placebo analysis that the results in Azar et al. (2018) are driven by the market share component of the measure of common ownership rather than the investor component. Azar et al. (2022) present a critique of the Dennis et al. (2022) placebo analysis and argue that the conclusions of Azar et al. (2018) are valid. This paper shows that the conclusions in Dennis et al.
(2022) still hold in light of the Azar et al. (2022) critique.
Common Lenders Facilitate Tacit Collusion
(with Kris Gerardi, Daniel Streitz, and Farzad Saidi).
July 2023

This paper presents the first micro-level empirical evidence of a positive relationship between product market prices and the extent to which competing firms borrow from the same lender.Using airline data from the 1993--2018 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. This positive correlation is present at both the market level and the more granular market-carrier level where we are able to compare airlines with different degrees of common lending relationships operating in the same market at the same point in time. The association between common lending and prices is stronger for airlines that are in financial distress, among first-class and business tickets where consumers are less price elastic, and for airlines that compete with each other in many markets. Our findings are consistent with banks maximizing the aggregate value of their loans by adjusting the terms, such as covenants, so as to avoid excessively aggressive pricing behavior among their competing borrowers.
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Presented Ibeo Conference, Sardegna, Italy
July 3, 2023