Working Papers and Work in Progress

Financial Constraints and Emission Intensity,  Single author (Draft available upon request)

"This paper examines how tighter financial constraints affect firms' emission intensity through an internal capital market lens. Winner-picking incentives predict cuts for marginal projects. When marginal projects are clean this increases emission intensity. First, I show that dirtier subsidiaries are more profitable for European firms in emission-intensive sectors. Then, exploiting the EBA Capital Exercise in 2011 as a shock to bank credit in a difference-in-difference (DiD) setting, I show that treated firms' clean subsidiaries shrink. However, what if funding access is linked to environmental performance? Firms may shift to cleaner projects to relax financial constraints reducing emission intensity (constraint-minimization mechanism). A theoretical framework models the trade-off between winner-picking and constraint-minimization. Finally, exploiting banks’ sustainable commitments in a staggered DiD setting I find that firms engage in constraint-minimization when credit constraints are related to environmental performance. Thus, the impact of financial constraints on emission intensity depends on firms' internal funding allocation and the nature of the constraint."

Awarded the 2023 FIR-PRI Finance & Sustainability Research Grant  ➡️  Here is a link to a short video presentation of this project

Presented at (and scheduled): IWH-DPE Seminar Series, Financial Regulation - Going Green workshop 2023, FEBS 2023, 1st Conference on Sustainable Banking & Finance CSBF 2023, EFIC 2023, EEA 2023, Norges Bank Workshop: "Women in Central Banking", ASSA 2024, BIS-CEPR-SCG-SFI Conference on Financial Intermediation 2024.

Climate Change-Related Regulatory Risks and Bank Lending, with Isabella Mueller  (R&R at the Journal of International Economics)

ECB Working Paper N.2670 (2022), Latest version available upon request. 

"We analyze how firms' climate change-related regulatory risks affect banks' lending. Exploiting the Paris Agreement in a difference-in-differences setting, we find that effects depend on how borrowers will be affected by regulation as well as the stringency of the existing regulatory environment where firms are located. Firms that benefit from regulation receive more credit only if located in more stringent regulatory environments. Conversely, firms hurt by regulation receive more credit if located in less stringent environments or if linked to banks with a portfolio tilted toward lending to negatively impacted firms. "

Awarded the 2021 Lamfalussy Fellowship by the ECB

Presented at: IWH-DPE seminar series, 52nd Annual Conference of the Money, Macro and Finance Society, IFABS 2021 Oxford Conference, Rare Voices in Economics Conference, E-Axes Conference on Steering Financial Markets in the Sustainable Transition, CREDIT 2021, Annual Meeting of the VfS 2021, 27th Annual Meeting of the DGF, Workshop on Sustainable Banking, 10th Workshop on Banks and Financial Markets, CompNet ProdTalk Ep.13, AFA PhD Poster Session 2022, 2022 Swiss Winter Conference on Financial Intermediation, Annual event of finance research letters 2022 CEMLA Conference, 26th Spring Meeting of Young Economists, 11th International Conference of the FEBS, 8th Conference on Financial Intermediation of the Bank of Portugal, EEA 2022 and IMF Macrofinancial Seminar.

How Do EU Banks' Funding Costs Respond to the CRD IV? An Assessment Based on the Banking Union Directives Database, with Thomas Krause, Lena Tonzer, and Cristina Zgherea   

IWH Discussion Papers No. 12/2024 (2024)

"The establishment of the European Banking Union constitutes a major change in the regulatory framework of the banking system. Main parts are implemented via directives that show staggered transposition timing across EU member states. Based on the newly compiled Banking Union Directives Database, we assess how banks' funding costs responded to the Capital Requirements Directive IV (CRD IV). Our findings show an upward trend in funding costs which is driven by an increase in cost of equity and partially offset by a decline in cost of debt. The diverging trends are most present in countries with an ex-ante lower regulatory capital stringency, which is in line with banks' short-run adjustment needs but longer-run benefits from increased financial stability. "

Published

Completing the European Banking Union: Capital cost consequences for credit providers and corporate borrowers, with Michael Koetter, Thomas Krause and Lena Tonzer, European Economic Review, Volume 148, September 2022, 104229

"The bank recovery and resolution directive (BRRD) regulates the bail-in hierarchy to resolve distressed banks in the European Union (EU). Using the staggered BRRD implementation across 15 member states, we identify banks’ capital cost responses and subsequent pass-through to borrowers towards surprise elements due to national transposition details. Average bank capital costs increase heterogeneously across countries with strongest funding cost hikes observed for banks located in GIIPS and non-EMU countries. Only banks in core E(M)U countries that exhibit higher funding costs increase credit spreads for corporate borrowers and contract credit supply. Tighter credit conditions are only passed on to more levered and less profitable firms. On balance, the national implementation of BRRD appears to have strengthened financial system resilience without a pervasive hike in borrowing costs."

Presented at: St. Andrews CRBF, EEA Annual Congress 2021, BIS/Deutsche Bundesbank/CEPR conference on “Evaluating financial regulation”, 2021 IADI Biennial Research Conference, Scottish Economic Society Annual Conference, 37th International Conference of AFFI, IBEFA summer meetings, 37th Symposium on Money, Banking and Finance, IWH-DPE seminar, Goethe University Finance seminar series, and the University of Zürich  

Other Work

Banking in the age of climate risks, with Huyen Nguyen, Book chapter, Encyclopedia of Monetary Policy, Financial Markets and Banking, Elsevier, forthcoming 

Climate Change-Related Regulatory Risks and Bank Lending, with Isabella Mueller, Suerf Policy Brief, No 387 - 2022.

Capital Markets Union: Database of Directives and Regulations, with Moritz Emlein, Lena Tonzer and Cristina Zgherea, IWH Technical Reports 02/2022.

Completion of the European Banking Union: Transposition Dates of the BRRD, with Michael Koetter, Thomas Krause and Lena Tonzer, IWH Technical Reports 02/2021.