Juan Pablo Gorostiaga

My main research interests are related to corporate finance and financial intermediation

Working Papers

• “Banking on Peers”: Industry Spillovers and Loan Portfolio Risk. (SSRN link) 

Single-authored Job Market Paper. I provide evidence that lenders with high exposure to a particular industry extend loans with stricter non-monetary contract terms to the firms in this industry. Specifically, these lenders deter debt-funded growth and induce a more conservative behavior by including tighter covenants, over and above the optimal level from a bilateral perspective. Moreover, they are incrementally stricter when the borrower's peers, to which the lender is also exposed, are closer to financial distress. This is consistent with lenders internalizing industry spillovers arising from product market competition, using loan contract terms to tame borrowers’ growth appetite, thus reducing the risk of their overall industry exposure. Exploiting bank mergers as an exogenous change in lender exposure, I verify that these findings are robust to endogeneity concerns and alternative explanations.

• • Presented at ASSA 2022 Annual Meeting – AFA PhD Session, NFA 2022, FDIC Annual Bank Research Conference 2022, FMA Atlanta 2022, FMA Europe 2022, Finance Forum 2022, FMCG Conference 2022, Conference on Credit Risk Evaluation 2022, UdeSA Annual Meeting 2021, and seminars  at Imperial College, U. Pompeu Fabra, Sveriges Riksbank, Banco de España, Paris Dauphine PSL, ESCP, CUNEF, UTDT, UdeSA, and IESE.
    
    

• "Concentrating on Bailouts": Government Guarantees and Bank Asset Composition.  (SSRN link)
  With Christian Eufinger and Björn Richter. This paper explores the relationship between government guarantees for banks and bank asset concentration. We show theoretically that bailout expectations incentivize banks to increase their investments in assets to which they are already heavily exposed, a mechanism we label "risk-taking via asset concentration.'' Empirically, we find evidence for this effect in U.S. bank panel data, exploiting exogenous changes in banks' political connections for variation in bailout expectations. Our findings at the bank level confirm that higher bailout expectations are associated with higher loan portfolio concentration. Analyzing the underlying portfolio adjustments at the bank-loan class level shows that banks, in response to increased bailout expectations, load up on exposures that already carry a significant weight in their portfolios. We further corroborate the mechanism within a specific loan class: mortgage lending. By exploiting geographic variation in real estate exposure, we show that banks redirect their mortgage origination toward counties with a high real estate return correlation with their existing mortgage portfolios when their government guarantee coverage expands.

  • Presented at EFA 2023, EEA 2023, FMA 2023, FINEST 2023, MadBar 2023 and PET 2024.
    
    

Work in Progress

• "Banking on Bailouts": Risk-Shifting at the Intensive Margin. Draft coming soon 

With Christian Eufinger and Zhiqiang Ye.