Juan Pablo Gorostiaga

My main research interests are related to corporate finance and financial intermediation. 

Currently, I study how lenders’ and investors’ pre-existing exposure determines lending behavior, and how it shapes the corporate policies of their borrowers.

Working Papers

• “Banking on Peers”: Industry Spillovers and Loan Portfolio Optimization. (link) 

Single-authored Job Market Paper. I provide evidence that lenders with high exposure to a particular industry extend loans with stricter non-monetary contract terms to the firms in this industry. Specifically, these lenders deter debt-funded growth and induce a more conservative behavior by including tighter covenants, over and above the optimal level from a bilateral perspective. Moreover, they are incrementally stricter when the borrower's peers, to which the lender is also exposed, are closer to financial distress. This is consistent with lenders internalizing industry spillovers arising from product market competition, using loan contract terms to tame borrowers’ growth appetite, thus reducing the risk of their overall industry exposure. Exploiting bank mergers as an exogenous change in lender exposure, I verify that these findings are robust to endogeneity concerns and alternative explanations.

• • Presented at ASSA 2022 Annual Meeting – AFA PhD Session, NFA 2022, FDIC Annual Bank Research Conference 2022, FMA Atlanta 2022, FMA Europe 2022, Finance Forum 2022, FMCG Conference 2022, Conference on Credit Risk Evaluation 2022, UdeSA Annual Meeting 2021, and seminars  at Imperial College, U. Pompeu Fabra, Sveriges Riksbank, Banco de España, Paris Dauphine PSL, ESCP, CUNEF, PUC Chile, UTDT, UdeSA, and IESE.
    
    

• Concentrating on Bailouts: Government Guarantees and Bank Asset Composition.  (link)
  With Christian Eufinger and Björn Richter. This paper studies the relationship between government guarantees for banks and bank asset concentration. We show theoretically that bailout guarantees, when combined with high leverage, incentivize banks to invest in asset classes they are already heavily exposed to. We test these predictions in U.S. panel data, exploiting exogenous changes in banks’ political connections for variation in bailout expectations. In line with the theory, we find that higher bailout probabilities are associated with higher portfolio concentration at the bank level. At the loan-class level, we find that an increase in bailout expectations leads to additional lending in loan classes that already have a high weight in a bank’s portfolio.

  • Presented at EFA 2023, EEA 2023, FMA 2023, and MadBar 2023.
    
    

Work in Progress

• Doubling Down on the Safe(ty) Bet: Bailouts and Risk-Shifting at the Intensive margin. 

With Christian Eufinger and Zhiqiang Ye.