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
E-mail: daniel.carvalho@marshall.usc.edu
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Education
Ph.D., M.A., Economics, Harvard
University
M.S., Economics, Catholic University
- Rio (PUC-Rio)
B.S., Mathematics, Catholic
University - Rio (PUC-Rio)
Published and Forthcoming Papers
The Real Effects
of Government-Owned Banks, Journal of Finance, forthcoming
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.
Working Papers
Financing
Constraints and the Amplification of Aggregate Downturns
Abstract: This paper studies the effects of industry peers’ financial
conditions on firms during industry downturns. I develop an approach to isolate
sharp differences in the timing of firms’ long-term debt maturity across close
but different years. The analysis provides direct evidence that common industry
fundamentals are not important for explaining these differences and uses them
to predict arguably exogenous variation in peers’ financial conditions at the
time of downturns. I find that firms experience significantly greater valuation
losses during industry downturns when their peers have their long-term debt
largely maturing at the exact time of downturns. These effects are only
important in industries with industry-specific assets, for firms with
significant amounts of their own debt maturing soon and are offset in concentrated
industries. I find no effects of peers’ financial positions outside common
industry downturns and implement several robustness checks. Overall, the
results suggest that externalities imposed by financially constrained firms on
industry peers can significantly amplify the effects of industry downturns in
an important set of industries.
Liquidity
Management and Industry Interactions: Evidence from Debt Maturity Choices
Joint
with Lori Santikian
Abstract: This paper studies the debt maturity decisions of firms and
provides evidence suggesting that firms in an industry manage their liquidity
in an interdependent way. We find that higher industry cash flow volatility is
associated with a smaller likelihood that firms have their long-term debt
largely maturing at the same time as their industry peers. We provide evidence
that this captures how firms time their debt maturity, as opposed to systematic
differences in debt maturity structure. This effect is only important when
peers’ debt level is significant, in industries with both specialized assets
and greater competition, and is robust to identification based on cash flow
correlations within an industry. Overall, our analysis suggests that, while
choosing financial policies in an important set of industries, firms attempt to
have greater liquidity in states of the world where industry peers are
financially weaker.
Lending
Relationships and the Effect of Banks Distress: Evidence from the 2007-2008
Financial Crisis
Joint
with Miguel Ferreira and Pedro Matos
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.
Supply-Side Effects and Industry Financing Cycles
Joint
with Lori Santikian
Abstract: This paper studies the importance and determinants of
industry-wide cycles in the role of equity versus debt as a source of new
capital for firms. We use changes over time in the composition of industry
peers’ net issues, conditional on their total net issues, to capture
industry-wide shifts in the composition of external financing. We find that
typical shifts in industry financing conditions predict significant and sharp
cycles in firms’ own composition of net issues. These industry financing
conditions are not correlated with changes in firms’ investment or cash flows,
nor do they predict future cash flows, cash flow volatility or investment. In
contrast, industry shifts towards equity financing and away from debt financing
are associated with temporarily higher stock prices and more positive long-term
equity analyst forecasts. At the same time, these shifts are associated with
temporarily higher spreads on bank loans. All these effects are concentrated in
the most competitive industries. Overall, our analysis suggests that changes in
supply-side conditions of capital markets often lead the pricing of equity and
debt issues in an industry to temporarily move in opposite directions, and that firms respond to these movements when choosing to issue equity or
debt.