Working Papers

Entrepreneur Experience and Success: Causal Evidence from Immigration Wait Lines

(with Franklin Qian, and Yifan Sun)

This paper investigates the causal impact of entrepreneurs' prior experience on startup success. Employing within-country changes in Green Card wait lines to instrument for immigrant first-time entrepreneurs' experience, we uncover that startups led by more experienced founders demonstrate superior funding, patenting, and employee growth. Specifically, each additional year of founder experience leads to a 0.6 p.p. (1 p.p.) increase in the likelihood of a startup undergoing an IPO (growing to over 1000 employees), over the subsequent decade. The larger initial team size, facilitated by the improved ability to recruit former colleagues, explains the observed startup success. Our findings imply that each extra year of experience is worth $170,000, underscoring a critical consideration for policymakers in the design of startup incubators.

Leveraged Payouts: How Using New Debt to Pay Returns in Private Equity Affects Firms, Employees, Creditors, and Investors

(with Abhishek Bhardwaj, and Sabrina Howell)

Private equity (PE) managers often generate financial returns without selling the portfolio company by leveraging company assets or cash flows. We study one such “leveraged payout" transaction, the dividend recapitalization (DR). As large, high-quality firms are selected for DRs, we identify causal effects using PE relationship bank CLO underwriting. DRs induced by cheap credit make firms riskier, with higher bankruptcy and failure rates, but also more IPOs and revenue growth. While DRs increase deal returns, they reduce wages, pre-existing loan prices, and fund returns (possibly reflecting moral hazard via new fundraising), pointing to negative implications for employees, creditors, and investors.

Labor Mobility, Entrepreneurship, and Firm Monopsony: Evidence from Immigration Wait-Lines

Revise & Resubmit at the American Economic Review

Doctoral Symposium & Travel Grant at Midwest Finance Association, 2022; Runner-Up for Best Doctoral Paper at Eastern Finance Association, 2022

This paper provides causal evidence on the impact of immigrant labor mobility frictions on business dynamism. An unexpected information-technology-related change in the Green Card process reduced inter-firm mobility for Indian and Chinese immigrants in October 2005. The mobility drop was twice as severe for startups compared to incumbent firms. The resultant reductions in immigrant labor availability reduced new firm formation, with 12,000 fewer new firms founded in markets with more Indian and Chinese employees in the next five years. The distortion also decreased the funding and IPO of existing startups with Indian and Chinese co-founders. Incumbent firms benefited from mobility restrictions with $28.7 billion in abnormal stock returns for public firms with Indian and Chinese employees in the ten days following the announcement. The slowdown in internal promotions for Indian and Chinese employees suggests monopsony power as an important driver for incumbent firm value. 

Publications

Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes
(with Atul Gupta, Sabrina Howell, and Constantine Yannelis)

The Review of Financial Studies,  0893-9454, November 2023
Editor's Choice, Awarded Best Paper in Health and Finance by Midwest Finance Association, 2021

Amid an aging population and a growing role for private equity (PE) in the care of older adults, this paper studies how PE ownership affects U.S. nursing homes using patient-level Medicare data. We show that PE ownership leads to a patient cohort with lower health risk. However, after instrumenting for the patient-nursing home match, we find that PE ownership increases mortality by 11%. Declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect. Overall, we conclude that PE has nuanced effects with adverse outcomes for a subset of patients. 

International Trade and Social Connectedness
(With Mike Bailey, Sebastian Hillenbrand, Theresa Kuchler, Rob Richmond, and Johannes Stroebel)

Journal of International Economics, 129(103418), March 2021

We use de-identified data from Facebook to construct a new and publicly available measure of the pairwise social connectedness between 170 countries and 32 European regions. We find that two countries trade more when they are more socially connected, especially for goods where information frictions may be large. The social connections that predict trade in specific products are those between the regions where the product is produced in the exporting country and the regions where it is used in the importing country. Once we control for social connectedness, the estimated effects of geographic distance and country borders on trade decline substantially.