The Effect of Diversification on Firm Productivity, The Journal of Finance, December 2002, Vol. 62 (6), 2379-2403 (lead article).
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The Managing with Style: The Effect of of Managers on Corporate Policy, joint with Marianne Bertrand,  The Quarterly Journal of Economics, November 2003, Vol. 118 (4), 1169-1208 (lead article). 
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The Illiquidity Puzzle: Evidene from Private Equity Partnerships, joint with Josh Lerner,  The Journal of Financial Economics, May 2004, Vol. 72 (2), 3-40 (lead article).
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Private Equity Performance: Returns, Persistence and Capital Flows, joint with Steven Kaplan,  The Journal of Finance, forthcoming.
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Does Legal Enforcement Affect Financial Transactions? The Contractual Channel in Private Equity, joint with Josh Lerner,  The Quarterly Journal of Economics, forthcoming.
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Banking Deregulation and Industry Structure: Evidence from the 1985 French Banking Act, revise and resubmit at The Journal of Finance
[ Full Text ]  Joint with Marianne Bertrand and David Thesmar

Abstract: This paper investigates the effects of banking deregulation on changes in banks' lending behavior and the ensuing incentives for firms to improved operations. Most importantly we analyze the implication of these changes on exit and entry decisions of firms and overall product market structure in the non- financial sectors. We use the deregulation of the French banking industry in 1985 as an economy wide shock to the banking sector that affected all industries, but in particular those that relied most heavily on external finance and bank loans. The deregulation eliminated government interference in lending decisions, allowed French banks to compete more freely against each other in the credit market and did away with implicit and explicit government subsidies for most bank loans. Post deregulation, banks seem to tie their lending decisions more closely to firm performance. Low quality firms that suffer negative shocks do not receive large increases in bank credit anymore. Instead, these firms display much a higher propensity to undertake restructuring measures post-reform, e.g. reduce wages and outsource production etc. We also observe a strong increase in performance post 1985. Moreover, we find that poorly performing firms experience a steeper increase in the cost of capital after the reforms than good firms. All these results are particularly strong for firms in more bank-dependent industries.  On the product market side, we observe a strong increase in asset reallocation in more-bank-dependent industries, mostly coming from higher entry and exit rates in these sectors. We also find an increase in allocative efficiency across firms in these sectors as well as a decline in concentration ratios.

Mixing Family With Business: A Study of Thai Business Groups and the Families Behind Them
[ Full Text]  Joint with Marianne Bertrand, Simon Johnson and Krislert Samphantharak

Abstract:A large fraction of business groups around the world are run by families. In this paper, we analyze how the structure of the families behind these business groups affects the groups' organization, governance and performance. To address this question, we constructed a unique data set of the family trees and the business groups they run for 70 of the largest business families in Thailand. We show that the group head and his brothers hold the majority of family positions within each group. However, we also find a positive relationship between family size and involvement of family members in the business group, especially when the ultimate control has passed from the founder to one of his descendants. Interestingly, groups that are run by larger families (more male siblings of the group head) tend to have lower performance. This negative performance effect coincides with a larger number of small firms in these groups, more fragmented internal capital markets and possibly more tunneling along the pyramidal structure of the groups. These performance and within-group resource allocation effects are again especially pronounced in groups where the founder is no longer active and ultimate control has been passed to one of his descendant. One hypothesis that emerges from our analysis is that part of the decay of family-run groups over time may be due to in-fighting for group resources as control becomes more diluted among different family members.

Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle
[ Full Text]  Joint with Josh Lerner and Wan Wong

Abstract:The returns that institutional investors realize from private equity investments differ dramatically across institutions. Using detailed and hitherto unexplored records of fund investors and performance, we document large heterogeneity in the performance of different classes of limited partners. In particular, endowments' annual returns are nearly 14% greater than average. Funds selected by investment advisors and banks lag sharply. These results are robust to controlling for the type and year of the investment, as well as to the use of different specifications. Analyses of reinvestment decisions and young funds suggest that the results are not primarily due to endowments' greater access to established funds. Finally, we examine the differences in the choice of intermediaries across various institutional investors and their relationship to success. We find that LPs that have higher average IRRs also tend to invest in smaller and slower growing funds and have a smaller fraction of GPs in their geographic area.

Politically Connected CEOs and Economic Outcomes: Evidence from France
[ Full Text]  Joint with Marianne Bertrand, Francis Kramarz and David Thesmar

Abstract:A number of recent papers have documented that the political elite may use its power to bestow favors onto connected private firms. In this paper, we investigate the reverse perspective: we ask whether the connected business elite alter its corporate decisions to bestow `` re-election’’ favors onto incumbent politicians. We study this question in the context of France, where we document that there is a tight overlap in educational and professional background between the CEOs of publicly-traded firms and politicians: more than half of the assets traded on the French stock markets are managed by CEOS who were formally civil servants, many of them holding government posts. Overall, our results provide support for the hypothesis that connections between CEOs and politicians factor into corporate decisions relating to job creation and destruction. We find that firms managed by connected CEOs create more jobs (open more plans, destroy less plants) in politically more contested areas, and that this is especially so around election years. We find only weak evidence that these politicans-firms networks follow partisan lines. The most robust evidence, if any, appears to be coming from the left of the political spectrum, with left-wing CEOs appearing to react more to the needs of left-wing political incumbents. Lastly, we explore whether the ``economic favors'' extended by connected CEOs to politicians are in some way reciprocated. We find evidence consistent with such reciprocation through privileged access to subsidy programs.