Working Papers

Getting Dirty Before You Get Clean: Institutional Investment in Fossil Fuels and the Green Transition 

Presentations: Olin Finance Conference at WashU PhD Poster Session, Columbia PE Conference PhD Workshop, Financial Intermediation Research Society (FIRS) 2024,  7th Annual Private Markets Research Conference 2024
Awards: E-Axes Forum Prize Honorable Mention

Abstract: Contrary to the prevailing notion that private equity investment in fossil fuels adversely affects environmental outcomes, this paper shows that it can facilitate the green transition by allowing cleaner technologies to develop. I show that private equity (PE) acquisitions of fossil fuel power plants are followed by an 8% higher likelihood of solar development and a 10% increase in the number of solar plants in the same county. This increase comes from institutional investment in solar, specifically from the investors related to the PE owners of fossil plants. I establish a causal link between the PE acquisition of fossil plants and solar development using the intensity of sunlight that falls on fossil plants as a measure of solar investment opportunity and the passage of the investment tax credits that made solar power commercially attractive. In a difference-in-differences setting, I show that PE firms are more likely to buy fossil plants that provide exogenously higher solar investment opportunities. These findings suggest that regulations prohibiting PE investment in fossil fuels may prevent clean energy financing and impede the green transition. 

Carbon Emissions and Shareholder Value: Causal Evidence from the U.S. Power Utilities 

Co-author: Amiyatosh Purnanandam

Presentations: Western Finance Association (WFA) 2023,  Financial Intermediation Research Society (FIRS) 2023,  China International Conference in Finance (CICF) 2023,  Johns Hopkins Carey Finance Conference 2023*,  Conference on Corporate Social Responsibility 2023,  American Finance Association (AFA) 2024*

* Presented by co-author

Abstract: We establish a causal link between carbon emissions and shareholder value using the passage of the Regional Greenhouse Gas Initiative (RGGI) that imposed a cap-and-trade policy for carbon emission on electric utilities in several Northeastern and Mid-Atlantic states. The regulation was successful in significantly bringing down the level of CO2 emission from plants located in the RGGI states compared to unaffected plants. The affected plant's revenue and profitability decreased after the RGGI as they transitioned to cleaner technology. Publicly traded power utility companies in the affected states experienced a drop in their profitability as well. Yet, they had a higher market-to-book ratio after the implementation of the initiative. Increase in value came from an increase in the expected future cash flows of the treated firms and increasing demand of these stocks by institutional funds focused on environmental goals. Our results show that short-term focus on profitability may be a significant impediment to carbon transition.

Effects of Creditor Rights on Bankruptcy Outcomes: Evidence from the Small Business Reorganization Act of 2019

Abstract: This paper studies the effects of creditor rights on bankruptcy outcomes of small businesses. Exploiting the passage of the Small Business Reorganization Act of 2019 as an exogenous shock to the creditor rights in bankruptcy, I show that reducing creditor rights increases Chapter 11 filings by small businesses. Successful reorganization, however, increases only for the firms that have more secured debt and multiple creditors. My findings suggest that (i) secured creditors are more biased towards liquidation and have excess market power in the reorganization process; (ii) in the presence of multiple creditors, secured creditors suffer from coordination failure that makes contract renegotiation more difficult.