Xiaobo Yu
PhD Candidate in Finance at Columbia Business School.
Interested in corporate finance theory and financial intermediation.
Will join University of Colorado Boulder as Assistant Professor of Finance.
In particular, I am interested in
- The coordination problems and their contractual solutions
- The design of financial institutions and their legal framework
- The role of banking network topology in shaping the financial architecture
- The effect of firm pledegability on liquidity insurance provision
My Research
A General Theory of Holdouts (JMP) (2023)
Ubiquitous are the holdout problems in which free-riders jeopardize socially beneficial transactions. A simple unanimity rule solves them all but we don't see it. Why the absence? Instead, we see systematically different solutions are used. Why the heterogeneity? The paper shows how limited commitment could answer all these questions and that policies increasing commitment could backfire.
Restructuring vs. Bankruptcy (2023) [Slides] R&R at the Journal of Finance
with Ed R. Morrison, Giorgia Piacentino and Jason R. Donaldson
How can firms resolve financial distress? Bankruptcy is one way, albeit costly. A less costly way is out-of-court restructuring. But hold-out problems render it infeasible. Do policies that encourage bankruptcy filings, by decreasing costs, crowd out restructuring? We find that the answer is no. We study how regulatory interventions can further increase welfare.
Systemic Risk in Financial Networks Revisited: The Role of Maturity (2023) [Slides] R&R at the Journal of Finance
with Giorgia Piacentino and Jason R. Donaldson
We ask how liquidity risk propagates in interbank networks. We show that the answer hinges on the maturity of interbank debt. Indebtedness and connectedness are sources of fragility if debt is short term, but of stability if it is long term. The right network of long-term debts implements the optimal allocation of liquidity.
This paper subsumed Netting (Donaldson and Piacentino, 2018).
Liquidity Insurance and Pledgeability (2023) [Slides]
Theoretically a credit line provides liquidity insurance and should be non-revocable but they are often revoked upon covenant violation. Why? Small firms that need liquidity insurance the most often have lower credit limit and are revoked more often. Why? The papers shows that these covenants are designed to align the incentive to prevent inefficient continuation and large firms obtain better insurance through cross-pledging.
Spatial outward FDI: Evidence from China's multinational firms (Review of International Economics, 2023)
with Yiqing Xie, Zhihong Yu and Yu Zhou
Where do multinational firms invest? We find they are more likely to invest in a country that has a closer link to its previous investment, both geographically and economically.
