image001             Daniel Carvalho

                       Assistant Professor of Finance

                       University of Southern California
                       Marshall School of Business

                        Contact Information
                        3670 Trousdale Parkway
                        Bridge Hall 308
                        Los Angeles, CA 90089-0804
                        Telephone: (213) 740-7677


Curriculum Vitae



Ph.D., M.A., Economics, Harvard University

M.S., Economics, Catholic University - Rio (PUC-Rio)

B.S., Mathematics, Catholic University - Rio (PUC-Rio)



The Real Effects of Government-Owned Banks, Journal of Finance 69(2), April 2014.  Internet Appendix

Abstract: Government ownership of banks is widespread around the world. Using plant-level data for Brazilian manufacturing firms, this paper provides evidence that government control over banks leads to significant political influence over the real decisions of firms. I find that firms eligible for government bank lending expand employment in politically attractive regions near elections. These expansions are associated with additional (favorable) borrowing from government banks. Also, the expansions are persistent, take place just before elections, only before competitive elections, and are associated with lower future employment growth by firms in other regions. I find no effects for firms that are ineligible for government bank lending. The analysis suggests that politicians in Brazil use bank lending to shift employment towards politically attractive regions and away from unattractive regions, creating a direct link between the political process and firms’ real behavior.


Financing Constraints and the Amplification of Aggregate Downturns, Review of Financial Studies 28(9), September 2015 (Lead article, Editor’s choice article).  Internet Appendix

Abstract: This paper shows that during industry downturns, firms experience significantly greater valuation losses when their industry peers’ long-term debt is maturing at the time of the shocks. Across a range of tests, the analysis addresses the endogenous determination of peer debt maturity structure. Overall, the evidence suggests that the negative externalities financially constrained firms impose on their industry peers can significantly amplify the effects of industry downturns. The evidence also provides support for the view that these amplification effects are driven by the adverse impact that financially constrained firms have on the balance sheets of their industry peers.


Lending Relationships and the Effect of Banks Distress: Evidence from the 2007-2008 Financial Crisis (joint with Miguel Ferreira and Pedro Matos), Journal of Financial and Quantitative Analysis 50(6), December 2015. 

Abstract: We study the role of lending relationships in the transmission of bank distress to nonfinancial firms using the 2007-2008 financial crisis and a sample of publicly traded firms from 34 countries. We examine the effect of both bank-specific shocks (announcements of bank asset write-downs) and systemic shocks (the failure of Bear Stearns and Lehman Brothers) that produced heterogeneous effects across banks. We find that bank distress is associated with equity valuation losses to borrower firms that have lending relationships with banks. The effect is concentrated in firms with the strongest lending relationships, with the greatest information asymmetry problems, and with the weakest financial position at the time of the shock. Additionally, the effect of relationship bank distress is not offset by borrowers’ access to public debt markets. Overall, our findings suggest that the strength of firms’ lending ties with banks is important to explain differences across firms in the effects of bank distress.


How Do Financing Constraints Affect Firms’ Equity Volatility?, Journal of Finance, forthcoming.     Internet Appendix  

Abstract: Higher firm equity volatility is often associated with non-fundamental trading by investors or constraints on firms’ ability to insulate their value from economic risks. This paper provides evidence that an important determinant of higher equity volatility among R&D-intensive firms is fewer financing constraints on firms’ ability to access growth options. I provide evidence for this effect by studying how persistent shocks to the value of firms’ tangible assets (real estate) affect their subsequent equity volatility. The analysis addresses concerns about the identification of these balance sheet effects and shows that these effects are consistent with broader patterns on the equity volatility of R&D-intensive firms.


The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity (joint with John Bai and Gordon Phillips) (revise and resubmit, Journal of Finance)    Internet Appendix

Presentations: NBER SI Corporate Finance, NBER SI CRIW, AFA, CSEF-EIEF-SITE Conference on Finance and Labor, FIRS

Abstract: Using a difference-in-difference methodology, we find that the state-level deregulation of local U.S. banking markets leads to significant increases in the reallocation of labor within local industries towards small firms with higher marginal products of labor. Using plant-level data, we propose and examine an approach that quantifies the industry productivity gains from labor reallocation and find that these gains are economically important. Our analysis suggests that labor reallocation is a significant channel through which local banking markets affect the aggregate productivity and performance of local industries.


Uncertainty, Real Options, and Firm Inaction: Evidence from Monthly Plant-Level Data           Internet Appendix

Presentations: SFS Cavalcade, WFA (scheduled)

Abstract: Using monthly plant-level data on Brazilian manufacturing, I examine how firms open, close and adjust the size of their existing plants around political events expected to significantly reduce political uncertainty. The analysis uses the fact that this resolution of political uncertainty leads to a drop in exchange rate volatility. I combine within-industry variation in the firm-level importance of both exports and imports to estimate how uncertainty affects firms’ decisions while controlling for first-moment effects. I find that uncertainty leads firms to significantly reduce both plant expansions and contractions. These effects are mostly important for large discrete decisions which are plausibly harder to reverse. The results also suggest that firms’ decisions to expand and contract their plants are less responsive to changes in business conditions in the presence of higher uncertainty. Overall, the evidence broadly supports the predictions of real-options effects where higher uncertainty creates an incentive for firms to wait and become inactive.