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SIDDHARTH VIJ


ASSISTANT PROFESSOR OF FINANCE

 * 

Welcome to my website! I am an Assistant Professor of Finance in the Terry
College of Business at the University of Georgia. I conduct primarily empirical
research in banking and corporate finance.


INTERESTS

 * Financial Intermediation
 * Corporate Finance


LINKS

 * CV

 * Official Website


EMAIL

siddharth.vij@uga.edu


PUBLICATIONS

UNEARTHING ZOMBIES (WITH NIRUPAMA KULKARNI, SK RITADHI, AND KATHERINE WALDOCK )
[PAPER]

Accepted, Management Science



Abstract

> Bankruptcy reforms that improve lenders' ability to recover claims from
> financially distressed borrowers can mitigate zombie lending. However, we show
> that after a 2016 bankruptcy reform in India, lenders are reluctant to
> recognize zombie credit as non-performing, impeding reform efficacy. A
> subsequent complementary regulation targeting lender discretion in recognizing
> non-performing assets improves zombie recognition five-fold. The lender
> disincentive to recognize zombies arises from undercapitalized banks'
> reluctance to realize loan losses and political economy frictions at
> state-owned banks. Resolving zombie credit allows lenders to redirect credit
> to healthy borrowers but effects are muted at banks more exposed to zombie
> borrowers.



REGULATING CARRY TRADES: EVIDENCE FROM FOREIGN CURRENCY BORROWING OF
CORPORATIONS IN INDIA (WITH VIRAL V. ACHARYA) [PAPER]

(previously titled "Foreign Currency Borrowing of Corporations as Carry Trades:
Evidence from India")

Accepted, Review of Economic Studies



Abstract

> We establish that macroprudential controls limiting capital flows can curb
> risks arising from foreign currency borrowing by corporates in emerging
> markets. Firm-level data show that Indian firms tend to issue more foreign
> currency debt when the interest rate differential between India and the United
> States is higher. This “carry trade” relationship, however, breaks down once
> regulators institute more stringent interest rate caps on borrowing; in
> response, riskier borrowers cut issuance most. Prior to adoption of this
> macroprudential measure, stock price exposure of issuers to currency risk
> rises after issuance, as witnessed during the “taper tantrum” episode of 2013;
> this source of vulnerability is nullified by the measure, as confirmed during
> the October 2018 oil price shock and the COVID-19 outbreak. We find no
> evidence of the policy’s efficacy being undermined by leakage or regulatory
> arbitrage.



RISK MANAGEMENT WITH VARIABLE CAPITAL UTILIZATION AND TIME-VARYING COLLATERAL
CAPACITY (WITH GUOJUN CHEN AND ZHONGJIN LU ) [PAPER]

Accepted, Management Science



Abstract

> We build a risk management model that incorporates variable capital
> utilization and time-varying collateral capacity. The former lets firms
> optimally choose capital utilization, and hence production, which affects
> capital depreciation and risk exposure. The latter means firms' ability to
> borrow and hedge increases with expected earnings and thus utilization.
> Calibrated solutions show both ingredients matter for firm value. We test the
> novel model predictions using a new dataset of oil and gas producers.
> Consistent with model predictions, we find utilization is negatively
> correlated with firm liquidity, while hedging is positively correlated with
> liquidity and expected profitability.




WORKING PAPERS

CLOSING THE REVOLVING DOOR (WITH JOSEPH KALMENOVITZ AND KAIRONG XIAO) [PAPER]

Revise and Resubmit, Journal of Finance



Abstract

> Regulators can leave their government position for a job in a regulated firm.
> Using granular payroll data on 22 million federal employees, we uncover the
> first systematic evidence of revolving door incentives. We exploit the fact
> that post-employment restrictions on federal employees, which reduce the value
> of their outside option, trigger when the employee's base salary exceeds a
> threshold. We document significant bunching of salaries just below the
> threshold, consistent with a deliberate effort to preserve private sector job
> opportunities. The effect is concentrated among agencies with broad regulatory
> powers, minimal supervision by elected officials, and frequent interactions
> with high-paying industries. In those agencies, 49% of the regulators respond
> to revolving door incentives and sacrifice 7.4% of their wage potential to
> stay below the threshold. Consistent with theories of regulatory capture, we
> find that revolving regulators initiate fewer enforcement actions and issue
> rules with lower costs of compliance. Using our findings to calibrate a
> structural model, we show that eliminating the restriction will increase the
> incentive distortion in the federal government by 1.7%. Combined, our results
> shed new light on the economic implications of the revolving door in the
> government.



REGULATORY RISK PERCEPTION AND SMALL BUSINESS LENDING (WITH JOSEPH KALMENOVITZ)
[PAPER]

Revise and Resubmit, Management Science



Abstract

> We uncover a significant friction in small business lending: perception of
> risk by Small Business Administration employees. Using novel data on SBA
> employees transferring across offices, we find that defaults on SBA loans in
> their previous location reduce SBA loans and job creation in their current
> location. The effect is independent of local economic conditions and the
> informational content of the non-local defaults, suggesting that SBA employees
> update their risk assessment irrationally. Our results are the first to
> document that regulators' potential misperception of economic conditions
> affects the ability of small businesses to obtain access to finance.



ACQUIRING FAILED BANKS [PAPER]

Revise and Resubmit, Journal of Financial and Quantitative Analysis



Abstract

> I study the relative importance of lending and deposit-taking for bank value.
> Comparing outcomes for winning banks to runner-up bidders in failed bank
> auctions, I find winners experience a 1.5% abnormal return and this increase
> is mainly due to deposits, not loans. After acquisition, the winning bank cuts
> lending to the failed bank’s borrowers and closes branches but it retains
> almost all acquired deposits. These deposits are not channeled into lending
> elsewhere. Rather, the acquirer is able to lower deposit rates, reflecting
> increased market power. Multiple results are independent of the failed bank,
> suggesting the findings have broader relevance.



SIZE-BASED REGULATION AND BANK FRAGILITY: EVIDENCE FROM THE WELLS FARGO ASSET
CAP (WITH TIANYUE RUAN) [PAPER]



Abstract

> We argue that heightened regulation on large banks contributed to the rise in
> banking fragility leading up to the regional bank crisis of 2023. In 2018,
> U.S. regulators restricted Wells Fargo from growing beyond $1.95 trillion in
> assets. Wells Fargo gave up large uninsured deposits to stay under the asset
> cap. We find that smaller and less regulated banks stepped in to fill the gap.
> Banks more geographically proximate to Wells Fargo experienced an influx of
> flighty uninsured deposits, particularly during the COVID-19 period. In turn,
> these banks experienced higher deposit outflows once monetary tightening
> commenced, and had lower equity returns following the collapse of Silicon
> Valley Bank. Additional analyses show that the deposit reallocation is not
> driven by local demand or general proximity to large banks.




TEACHING


UGA TERRY

CORPORATE FINANCE THEORY (UG) – FALL 2018-2023 [SYLLABUS]


NYU STERN

CORPORATE FINANCE (UG) – SUMMER 2015 [SYLLABUS]

 * Awarded Commendation for Teaching Excellence


CONTACT

 * siddharth.vij@uga.edu
   
 * 620 S. Lumpkin St, Amos Hall B324, Athens GA 30602 USA

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