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.

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).

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, forthcoming

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? (revise and resubmit, 3rd round, Journal of Finance)

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 based on two approaches. First, I examine the impact of persistent shocks to the value of firms’ tangible assets (real estate) on their subsequent equity volatility. Second, I study the differential changes in the equity volatility of R&D-intensive firms around the financial crisis.


Uncertainty, Real Options, and Firm Inaction: Evidence from Monthly Plant-Level Data  (revise and resubmit, Journal of Financial Economics)

Abstract: Using monthly plant-level data on Brazilian manufacturing, I examine how firms open, close and adjust the labor of plants around significant and predictable drops in uncertainty. I predict such drops in uncertainty by combining political events expected to significantly reduce exchange rate volatility with within-industry variation in firm exposure to such volatility. I find that firms are significantly less likely to both open and close plants in the period leading to the resolution of uncertainty, and that both these patterns sharply reverse after uncertainty is resolved. These patterns are not matched with similar effects in within-plant labor adjustments exposed to limited adjustment costs and do not emerge in falsification tests. The analysis suggests that these results capture the effect of uncertainty on firms’ decisions. Overall, the evidence broadly supports the predictions of real-options effects where higher uncertainty creates incentives for firms to wait and become inactive.


The Impact of Bank Credit on Labor Reallocation and Aggregate Industry Productivity (joint with John Bai and Gordon Phillips)

Abstract: Using a difference-in-difference methodology, we find that the state-level banking deregulation of local U.S. credit markets leads to significant increases in the reallocation of labor within local industries towards firms with higher marginal products of labor. Using firm production functions estimated with 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 credit market conditions affect the aggregate productivity and performance of local industries.