Papers Containing Keywords(s): 'borrowing'
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Authors
Nuri Ersahin - 4
Viewing papers 1 through 10 of 25
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Working PaperFresh Start or Fresh Water: The impact of Environmental Lender Liability
January 2026
Working Paper Number:
CES-26-05
I study the impact of lenders' environmental responsibility. The empirical setting exploits the U.S. Lender Liability Act of 1996, which reduced lenders' exposure to the environmental clean-up costs attached to some of their debtors' collateral, and employs difference-indifferences specifications estimated using EPA and U.S. Census microdata. Firms whose lenders face lower environmental liability risks increase pollution, reduce investment in abatement technologies by 14.7%, while experiencing small production and employment distortions. Lenders facing higher liability risks offer loans with less favorable pricing, thus financially incentivizing firms to become more environmentally responsible, and potentially monitor borrowers via shorter debt maturity.View Full Paper PDF
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Working PaperSame Shock, Separate Channels: House Prices and Firm Performance in the Great Recession
January 2026
Working Paper Number:
CES-26-03
Combining confidential business-level microdata with housing and banking data, I document large and persistent effects of local house prices on employment at small businesses, and particularly young businesses, during the Great Recession. I show that the effect on entry is important for explaining the disproportionate effect on young businesses, while young firm exit is also disproportionately affected. I then explore the channels through which house prices affect business outcomes. I use survey data to show that reliance on either personal assets or home equity is associated with increased sensitivity to house prices. I then use local bank balance sheet information to show both young and old firms are sensitive to local credit shocks, with some evidence of a larger effect on young businesses. I develop a macroeconomic model that is consistent with these findings where house prices work through two channels: a bank credit supply channel and a housing collateral channel.View Full Paper PDF
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Working PaperBorrowing Constraints, Markups, and Misallocation
December 2025
Working Paper Number:
CES-25-75
We document new facts that link firms' markups to borrowing constraints: (1) less constrained firms within an industry have higher markups, especially in industries where assets are difficult to borrow against and firms rely more on earnings to borrow; (2) markup dispersion is also higher in industries where firms rely more on earnings to borrow. We explain these relationships using a standard Kimball demand model augmented with borrowing against assets and earnings. The key mechanism is a two-way feedback between markups and borrowing constraints. First, less constrained firms charge higher markups, as looser constraints allow them to attain larger market shares. Second, higher markups relax borrowing constraints when firms rely on earnings to borrow, as those with higher markups have higher earnings. This two-way feedback lowers TFP losses from markup dispersion, particularly when firms rely on earnings to borrow.View Full Paper PDF
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Working PaperU.S. Banks' Artificial Intelligence and Small Business Lending: Evidence from the Census Bureau's Annual Business Survey
February 2025
Working Paper Number:
CES-25-07
Utilizing confidential microdata from the Census Bureau's new technology survey (technology module of the Annual Business Survey), we shed light on U.S. banks' use of artificial intelligence (AI) and its effect on their small business lending. We find that the percentage of banks using AI increases from 14% in 2017 to 43% in 2019. Linking banks' AI use to their small business lending, we find that banks with greater AI usage lend significantly more to distant borrowers, about whom they have less soft information. Using an instrumental variable based on banks' proximity to AI vendors, we show that AI's effect is likely causal. In contrast, we do not find similar effects for cloud systems, other types of software, or hardware surveyed by Census, highlighting AI's uniqueness. Moreover, AI's effect on distant lending is more pronounced in poorer areas and areas with less bank presence. Last, we find that banks with greater AI usage experience lower default rates among distant borrowers and charge these borrowers lower interest rates, suggesting that AI helps banks identify creditworthy borrowers at loan origination. Overall, our evidence suggests that AI helps banks reduce information asymmetry with borrowers, thereby enabling them to extend credit over greater distances.View Full Paper PDF
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Working PaperLeveraged Payouts: How Using New Debt to Pay Returns in Private Equity Affects Firms, Employees, Creditors, and Investors
January 2025
Working Paper Number:
CES-25-12
We study the causal effect of a large increase in firm leverage. Our setting is dividend recapitalizations in private equity (PE), where portfolio companies take on new debt to pay investor returns. After accounting for positive selection into more debt, we show that large leverage increases make firms much riskier, dramatically raising exit and bankruptcy rates but also IPOs. The debt-bankruptcy relationship is in line with Altman-Z model predictions for private firms. Dividend recapitalizations increase deal returns but reduce: (a) wages among surviving firms; (b) pre-existing loan prices; and (c) fund returns, which seems to reflect moral hazard via new fundraising. These results suggest negative implications for employees, pre-existing creditors, and investors.View Full Paper PDF
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Working PaperAfter the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters
April 2024
Working Paper Number:
CES-24-20
Does emergency credit prevent long-term financial distress? We study the causal effects of government-provided recovery loans to small businesses following natural disasters. The rapid financial injection might enable viable firms to survive and grow or might hobble precarious firms with more risk and interest obligations. We show that the loans reduce exit and bankruptcy, increase employment and revenue, unlock private credit, and reduce delinquency. These effects, especially the crowding-in of private credit, appear to reflect resolving uncertainty about repair. We do not find capital reallocation away from neighboring firms and see some evidence of positive spillovers on local entry.View Full Paper PDF
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Working PaperAccess to Financing and Racial Pay Gap Inside Firms
July 2023
Working Paper Number:
CES-23-36
How does access to financing influence racial pay inequality inside firms? We answer this question using the employer-employee matched data administered by the U.S. Census Bureau and detailed resume data recording workers' career trajectories. Exploiting exogenous shocks to firms' debt capacity, we find that better access to debt financing significantly narrows the earnings gap between minority and white workers. Minority workers experience a persistent increase in earnings and also a rise in the pay rank relative to white workers in the same firm. The effect is more pronounced among mid- and high-skill minority workers, in areas where white workers are in shorter supply, and for firms with ex-ante less diverse boards and greater pre-existing racial inequality. With better access to financing, minority workers are also more likely to be promoted or be reassigned to technology-oriented occupations compared to white workers. Our evidence is consistent with access to financing making firms better utilize minority workers' human capital.View Full Paper PDF
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Working PaperFirm Finances and Responses to Trade Liberalization: Evidence from U.S. Tariffs on China
November 2021
Working Paper Number:
CES-21-37
This paper examines the relationship between a firm's finances and its response to trade liberalization. Using a landmark change in U.S. tariff policy vis-'-vis Chinese imports and micro level data from the U.S. Census Bureau, I find larger manufacturing job losses in better capitalized firms - those with less leverage and more cash on hand. The effects concentrate in industries where weaker balance sheets are likely to lead to collateral and other borrowing constraints, helping rule out alternative explanations. Finally, domestic manufacturing job losses are not accompanied by greater reductions in sales or aggregate employment, but better capitalized firms do exhibit reduced input costs and increased productivity. These findings point to offshoring as the predominant firm response to trade liberalization and suggest a role for financial capacity in facilitating offshoring investments.View Full Paper PDF
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Working PaperHow Collateral Affects Small Business Lending: The Role of Lender Specialization
August 2021
Working Paper Number:
CES-21-22
I study the role of collateral on small business credit access in the aftermath of the 2008 financial crisis. I construct a novel, loan-level dataset covering all collateralized small business lending in Texas from 2002-2016 and link it to the U.S. Census of Establishments. Using textual analysis, I show that post-2008, lenders reduced credit supply to borrowers outside of the lender's collateral specialization. This result holds when comparing lending to the same borrower from different lenders, and when comparing lending by the same lender to different borrowers. A one standard deviation higher specialization in collateral increases lending to the same firm by 3.7%. Abstracting from general equilibrium effects, if firms switched to lenders with the highest specialization in their collateral, aggregate lending would increase by 14.8%. Furthermore, firms borrowing from lenders with greater specialization in the borrower's collateral see a larger growth in employment after 2008. Finally, I show that firms with collateral more frequently accepted by lenders in the economy find it easier to switch lenders. In sum, my paper shows that borrowing from specialized lenders increases access to credit and employment during a financial crisis.View Full Paper PDF
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Working PaperHome Equity Lending, Credit Constraints and Small Business in the US
October 2020
Working Paper Number:
CES-20-32
We use Texas's constitutional amendment in 1997 that expanded the scope of home equity loans as a source of exogenous variation to estimate the effects of relaxing credit constraints on small businesses. We find, using standard panel data methods and restricted-use microdata from the US Census Bureau, that the Texas amendment increased the use of home equity finance by small businesses, increased new business and job creation and reduced establishment exit and job loss. The effects are larger and significant for businesses with fewer than ten employees.View Full Paper PDF
