Assistant Professor of FinanceGeorgia Institute of Technology Scheller College of Business
800 West Peachtree Street, N.W.
30308 Atlanta, USA
Phone: +1 404 385 4569
eMail: andras.danis [at] scheller.gatech.edu
Link to university profile
Link to SSRN author page
Publications and Working Papers:
Refinancing, Profitability, and Capital Structure. Journal of Financial Economics, December 2014, Volume 114, Issue 3.
Co-authored with Daniel Rettl and Toni Whited. Winner of the Jensen Prize (second place) for the best paper in Corporate Finance and Organizations published in the Journal of Financial Economics in 2014. Data and code.
We revisit the well-established puzzle that leverage is negatively correlated with measures of profitability. In contrast, we find that at times when firms are at or close to their optimal level of leverage, the cross-sectional correlation between profitability and leverage is positive. At other times, it is negative. These results are consistent with dynamic trade-off models in which infrequent capital structure rebalancing is optimal. The time series of market leverage and profitability in the quarters prior to rebalancing events match the patterns predicted by these models. Our results are not driven by investment layouts, market timing, payout, or mechanical mean reversion of leverage.
Do Empty Creditors Matter?
Evidence from Distressed Exchange Offers. Management Science, 2017, Volume 63, Number 5.
We examine the effect of credit default swaps (CDSs) on the restructuring of distressed firms. Theoretically, we show that if bondholders are insured with CDSs, the participation rate in a restructuring decreases. Using a sample of distressed exchange offers, we estimate that the participation rate is 29% lower if the firm has CDSs traded on its debt, compared to an unconditional mean of 54%. We use the introduction of the Big Bang protocol as a natural experiment. The results suggest that firms with CDSs find it difficult to reduce debt out-of-court, which is inefficient because it increases the likelihood of future bankruptcy.
The Real Effects of Credit Default Swaps. Journal of Financial Economics, 2018, Volume 117, Issue 1. Co-authored with Andrea Gamba.
We examine the effect of introducing Credit Default Swaps (CDSs) on firms’ investment and financing policies. Our model allows for dynamic investment and dynamic financing using equity and debt, and credit risk can be hedged using CDSs. A calibrated version of the model allows us to do a counterfactual analysis, in which we compare an economy with to an economy without a CDS market. Both the negative effect of CDSs of increasing the probability of bankruptcy and the positive effect of reducing the risk of strategic default are present in the model. The effect of reducing the cost of debt dominates, allowing the firm to gain from a source of financing less costly than equity, which leads to higher investment and firm value. Our model is able to reconcile seemingly conflicting empirical evidence regarding the effect of CDSs in reducing the cost of debt capital and in increasing the default probability. Finally, we show that the real effect on investment and firm value is largest for firms that are small and have high growth opportunities.
The Impact of Right-to-Work Laws on Worker Wages: Evidence from Collective Bargaining Agreements. Revise and Resubmit, Journal of Financial Economics. Co-authored with Sudheer Chava and Alex Hsu.
We analyze the impact of the introduction of right-to-work (RTW) laws across the US on wages. After the introduction of RTW laws, there is a decrease in wages negotiated through collective bargaining agreements (CBAs). Further, the number of CBAs decreases, and the gap between the fraction of workers covered by a CBA and the fraction of union members increases. Firms increase investment and employment, and reduce their financial leverage. Our results suggest a decline in union bargaining power after RTW laws are passed, which could be a contributing factor to the recent slowdown in wage growth in the US.
Media coverage: CNN Money, National Affairs - Daily Findings, Crain's Chicago Business, AL.com
Shareholder Monitoring with
This paper provides a generalization of the theory of shareholder monitoring, originally developed by Admati, Pfleiderer, and Zechner (1994). An activist shareholder can trade with a finite number of strategic passive investors. If there are only a few investors, then their strategic behavior leads to an allocation of shares that increases the activist investor's incentive to monitor, which is socially desirable. This is because they take into account the effect of their purchases on the incentives of the large shareholder, so they buy fewer shares. On the other hand, a large number of investors leads to free-riding and less monitoring. In the limit, as the number of investors grows to infinity, a similar equilibrium as in Admati, Pfleiderer, and Zechner (1994) emerges. The model formalizes the idea that a financial market with a small number of shareholders provides stronger incentives for shareholder monitoring. The prediction is consistent with empirical findings which show that in countries where monitoring is important, e.g. because of weak legal protection of investors, shareholder concentration is high and stock market participation is low.
Work in progress:
Dark Knights: The Rise in Firm Intervention by CDS Investors. Co-authored with Andrea Gamba.
The Effect of Credit Default Swaps on Financial Contracting. Co-authored with Anastasia Lashova and Andrea Gamba.