Job Market Paper
Tania (Tetyana) Babina
Finance Job Market Candidate (Class of 2016)
I am a PhD candidate in Finance and will be available for interviews at the upcoming AFA/ASSA meeting in San Francisco.
Empirical Corporate Finance, Entrepreneurship
About my Research
My research is at the juncture of corporate finance, labor economics, and entrepreneurship. I am interested in how firm financing choices affect real economic activity, such as the creation of new firms by former employees, and employee outcomes in paid employment. In my job market paper, I show that firm financial distress drives the exit of workers to found start-ups. In another paper with Paige Ouimet and Rebecca Zarutskie, we examine the impact of a successful initial public offering (IPO) on a firm's existing employees and their future career choices.
- Selected for presentation at the Colorado Finance Summit, PhD session, December 2015
Why do employees become entrepreneurs? This paper shows that firm financial distress drives the exit of workers to pursue entrepreneurship. In a difference-in-difference setting, I find that, following unexpected industry shocks, employees at relatively more financially levered public firms are more likely to exit to found new firms. These new firms are created because financially distressed firms are less able to retain productive workers who exit to found start-ups. Entrepreneurs exiting financially distressed employers earn higher wages prior to leaving paid employment and after founding start-ups, compared to entrepreneurs exiting non-distressed firms. Consistent with financial distress driving productive workers into entrepreneurship, start-ups created following financial distress have high future employment growth. Distressed firms are less able to retain entrepreneurial workers in part because ex ante contracts restricting employee mobility are not enforceable. In support of this argument, I find that the effect is concentrated in states with weaker enforcement of non-compete agreements. The results suggest that the social costs of distress might be lower than the private costs to financially distressed firms.
- Presented at the NBER's Entrepreneurship Working Group Meeting, December 2015
Using matched employee-employer data from the US Census, we examine the impact of a successful initial public offering (IPO) on a firm's existing employees and their future career choices. Using an instrumental variables strategy, we find strong evidence that going public induces employees to depart for start-ups. Moreover, this result is specific to start-ups. We find no change in the rate of employee departures to established firms. We suggest and find evidence consistent with two non-mutually exclusive mechanisms which can explain this pattern. First, following an IPO, many employees who received large stock grants in the past are able to cash out. This shock to employee wealth may allow employees to better tolerate the risks associated with joining a start-up. Alternatively, employees may leave following an undesirable cultural change following the IPO. Our results suggest that the recent secular decline in IPO activity and new firm creation in the U.S. may be causally linked. The recent decline in IPOs means fewer workers move to startups, decreasing overall new firm creation in the economy.
The U.S. municipal bond market provides a natural laboratory, free of impediments to capital flows across states or currency considerations, to assess how the composition of ownership of government debt affects government bond prices and real economic outcomes. We exploit quasi-exogenous variation in local (in-state) bond ownership arising from variation in state tax privileges for state-resident bondholders. A high in-state holding of local government debt is associated with higher susceptibility of government bond prices to demand and supply shocks, heightened sensitivity of bond prices to local political uncertainty, and difficulty raising capital for public projects during crises.
Work in Progress
Friends During Hard Times: Evidence from the Great Depression (Diego Garcia and Geoff Tate)
Who Leaves Work for Startups? Founder Characteristics and Entrepreneurial Success
Does Bank Distress Stifle Firm Growth? Evidence from International Shocks (Paige Ouimet, Geoff Tate, and Rebecca Zarutskie)
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