Working Papers

1. No Margins, No Mission: The Effects of Immigration on the Hospital Sector

with Katharina Lewellen and Giorgo Sertsios

 (Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5204127) 

• Abstract: We study the effects of immigration on the U.S. hospital sector. Instrumenting for immigration inflows using historical enclaves of foreign-born nationalities, we find that a 1% increase in immigration (relative to the county's initial population) leads to a 2.17% decline in hospital bed capacity over ten years. The effect is primarily driven by nonprofit hospitals, which are more likely to exit through closures or acquisitions. Continuing nonprofit hospitals experience a significant decline in their profit margins due to increased expenditure on uncompensated care. To cover the financial shortfalls, nonprofits curtail fixed-asset investments but do not raise additional funds. Our findings suggest that nonprofit hospitals operate under tight financing and operating constraints, limiting their ability to absorb profitability shocks and sustain their "mission-driven" objectives. In contrast, government-owned hospitals experience large losses but avoid exit and expand market shares.

2. Product Market Decisions and Subprime Lending by Captive Finance Companies

(Available at SSRN: https://ssrn.com/abstract=4218302)

• AFA 2023 Poster session, MFA 2023, Cavalcade 2025

• Abstract: I study whether captive financing, a form of providing funding to consumers, helps companies gain a strategic advantage in managing their product market portfolio. Using detailed data on auto loans, I show that captive lenders alter the financing terms throughout the product life cycle. They reduce interest rates and relax loan standards (1) when the underlying car models become outdated; (2) when competitors release new models; and (3) when they experience exogenous shocks such as recalls. While the lower interest rates offered by captive lenders reduce the likelihood of consumer default in the short term, the average default rate eventually increases in the longer horizon because the loose loan standards allow more subprime borrowers to access credit. For consumers who cannot find a loan from non-captive lenders, borrowing from captive lenders helps them in purchasing a car, but they could potentially be approved for a loan they cannot afford because of the lenders’ willingness to dispense higher-risk loans. These findings collectively suggest that captive financing is a tool manufacturers use to boost car sales throughout the product life cycle, while this tool could induce overleveraging by consumers.

3. Experimenting with Firm Boundaries: The Case of Franchising

with Steven Xiao

 (Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4811276) 

• Presentations: FMA 2022 , AREUEA-ASSA 2023

• Abstract: This paper studies firms’ strategic adoption of franchising, an alternative organizational form, in the process of geographic expansion. Analyzing comprehensive data of franchise establishments, we find that corporations typically franchise in new, remote, and rural markets, but less so when direct flights become available. Local franchisees’ investments notably forecast house price growth, while franchisors' investments do not, indicating franchisees' superior information about local markets. Franchisors increase direct investments in markets where existing stores perform well, with followers outperforming pioneers on average. These findings suggest that franchising serves as a strategic tool to mitigate information friction when corporations explore unfamiliar markets.