Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program

Boris  Vallée; Julien  Sauvagnat; Thorsten  Martin; Jean-Noel  Barrot

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Working Paper | 2020

Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program

by Boris Vallée, Julien Sauvagnat, Thorsten Martin and Jean-Noel Barrot

Keywords: Labor; France;

Language: English

Format: Print

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Citation:

Vallée, Boris, Julien Sauvagnat, Thorsten Martin, and Jean-Noel Barrot. "Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program." Working Paper, February 2020.

About the Author

Boris Vallee

Torstein Hagen Associate Professor of Business Administration

Finance

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Working Paper | 2020

Weak Credit Covenants

Victoria Ivashina and Boris Vallée

Using novel data on 1,240 credit agreements, we investigate sources of contractual complexity in the leveraged loan market. While negative covenants are widespread, carve-out and deductible clauses that weaken them are as frequent. We propose simple measures of contractual weakness, which uniquely explain the market-wide price reaction that followed the 2017 J.Crew restructuring, a high profile use of such contractual elements. Leveraged buyouts have significantly weaker loan agreements, and a larger non-bank funding of a loan is conducive to weaker contractual terms. Weak covenants translate to modestly higher issuance spreads. Overall, our findings are consistent with sophisticated borrowers catering to a reaching-for-yield phenomenon by exploiting contractual complexity.

Keywords: Credit; Agreements and Arrangements;

Citation:
Ivashina, Victoria, and Boris Vallée. "Weak Credit Covenants." NBER Working Paper Series, No. 27316, June 2020. (R&R at the Journal of Financial Economics.) View Details

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Case | HBS Case Collection | February 2020

Seso Global: Building a Blockchain-enabled Property Marketplace in Nigeria

Boris Vallee and Yang (Dolly) Yu

The mutual aspiration of addressing the housing shortage and improving real estate market efficiency led Daniel and Phillip to co-found Seso Global in 2017. Seso Global developed a unique integrated platform to streamline and rationalize the process of acquiring and financing a home in Nigeria. In particular, the Seso team aimed to create a blockchain-enabled ledger of land titles to address a key challenge of Nigerian real estate and mortgages market: ensuring rightful ownership of properties. Their platform combined a land registry management and query portal, a property and mortgage marketplace, and a land service provider marketplace. However, VC investors had been grilling them on their business and revenue model. On the other hand, the impact investors they had talked to were focused on whether their activity would have an effect at the bottom of the pyramid. Pondering on the comments made by the VC, Daniel and Phillip were discussing which part of the platform to prioritize. What should be the focus of their business model? Who should be their main clients? Answers to these questions would be key to win over investors and scale up their operations.

Keywords: fintech; Blockchain; developing markets; entrepreneurial management; Financing and Loans; Online Technology; Business Model; Property; Growth and Development Strategy; Developing Countries and Economies; Real Estate Industry; Africa; Nigeria;

Citation:
Vallee, Boris, and Yang (Dolly) Yu. "Seso Global: Building a Blockchain-enabled Property Marketplace in Nigeria." Harvard Business School Case 220-055, February 2020. View Details

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Article | Review of Financial Studies | October 2019

Returns to Talent and the Finance Wage Premium

Boris Vallée and Claire Célérier

To study the role of talent in finance workers' pay, we exploit a special feature of the French higher education system. Wage returns to talent have been significantly higher and have risen faster in finance since the 1980s than in other sectors. Both wage returns to project size and the elasticity of project size to talent are also higher in this industry. Last, the share of performance pay varies more for talent in finance. These findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale.

Keywords: compensation; Finance; Compensation and Benefits; Wages; Banking Industry;

Citation:
Vallée, Boris, and Claire Célérier. "Returns to Talent and the Finance Wage Premium." Review of Financial Studies 32, no. 10 (October 2019): 4005–4040. View Details

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Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program

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