Krishnamurthy Subramanian - Academia.edu (original) (raw)

Papers by Krishnamurthy Subramanian

Research paper thumbnail of Labor Laws and Innovation1

thank Hanh Le and Chandrasekhar Mangipudi for excellent research assistance. Labor Laws and Innov... more thank Hanh Le and Chandrasekhar Mangipudi for excellent research assistance. Labor Laws and Innovation Stringent labor laws can provide firms a commitment device to not punish short-run failures and thereby spur their employees to pursue value-enhancing innovative activities. Using patents and citations as proxies for innovation, we identify this effect by exploiting the time-series variation generated by staggered country-level changes in dismissal laws. We find that within a country, innovation and economic growth are fostered by stringent laws governing dismissal of employees, especially in the more innovation-intensive sectors. Firm-level tests within the United States that exploit a discontinuity generated by the passage of the federal Worker Adjustment and Retraining Notification Act confirm the cross-country evidence.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of 5-2018 Dismissal Laws , Innovation and Economic Growth

I theoretically and empirically show that dismissal laws laws that impose hurdles on firing of em... more I theoretically and empirically show that dismissal laws laws that impose hurdles on firing of employees spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees. Because innovation is inherently risky and employment contracts are incomplete, dismissal laws enable such commitment. Specifically, absent such laws, firms cannot contractually commit so ex-ante. The commitment provided by dismissal laws encourages employees to exert greater effort in risky, but path-breaking, projects thereby fostering firm-level innovation. I provide empirical evidence supporting this thesis using the discontinuity provided by the passage of the federal Worker Adjustment and Retraining Notification Act. Using the fact that this Act only applied to firms with 100 or more employees, I undertake difference-indifference and regression discontinuity tests t...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Borrowers’ Distress and Debt Relief: Evidence from a Natural Experiment

The Journal of Law and Economics, 2018

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Agency Costs of CEO Turnover in Banks: Evidence Using Exogenous Turnovers

SSRN Electronic Journal, 2015

We examine the effects of chief executive officer (CEO) turnover in banks. Incoming bank CEOs fac... more We examine the effects of chief executive officer (CEO) turnover in banks. Incoming bank CEOs face problems of information asymmetry because banks’ operations are opaque and bank risk can change dramatically in a short time. These CEOs may therefore change bank policies to manage their personal risks. Since CEO turnover is usually endogenous, we utilize a setting in which CEO turnover is based solely on retirement age and is thus exogenous to bank performance. Consistent with our thesis, incoming CEOs increase provisioning for future delinquencies and shrink lending. Bank stock prices decline following these changes. Politically motivated lending or ever-greening cannot explain our results.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of The Color of Money: A Startup's Choice Among Venture Capitalists

SSRN Electronic Journal, 2012

Abstract: Venture Capitalists (VCs) differ significantly from one another with respect to the non... more Abstract: Venture Capitalists (VCs) differ significantly from one another with respect to the non-financial resources--from business expertise to the network of contacts with potential suppliers, customers, employees and IPO underwriters--they offer their portfolio firms. In ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of How Do Firm Capabilities Affect Their Boundary Decisions?: Theory and Evidence

SSRN Electronic Journal, 2004

I would like to thank my advisors – Marianne Bertrand, Wouter Dessein, Milton Harris, Raghuram Ra... more I would like to thank my advisors – Marianne Bertrand, Wouter Dessein, Milton Harris, Raghuram Rajan and especially Luigi Zingales for their encouragement, support and guidance and participants at the University of Chicago workshop on Theory of Organizations and the Corporate ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Employment Protection Laws and Privatization

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Law and Project Finance

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Does Education Affect Voting Preferences? Evidence from Voting Records in Indian Elections

SSRN Electronic Journal, 2014

Bookmarks Related papers MentionsView impact

Research paper thumbnail of CEO Turnover and Earnings Management in Banks: Evidence from India

SSRN Electronic Journal, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Deregulation of Bank Entry and Bank Failures

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Valuation of Private, Innovative Targets: Evidence from Cisco's Acquisitions

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Infrastructure and FDI: Evidence from District-Level Data in India

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Corporate Governance and Innovation: Theory and Evidence

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Can Mandatory Rotation Policy Distort Incentives? Evidence from Loan O fficer Rotation

SSRN Electronic Journal, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Bankruptcy Codes and Innovation

Review of Financial Studies, 2009

We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered fir... more We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Wrongful Discharge Laws and Innovation

Review of Financial Studies, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Banking deregulation and innovation

Journal of Financial Economics, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Labor Laws and Innovation

The Journal of Law and Economics, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Proof of Lemma: The optimal project choice is given by

Derivation of E’s payoff at date 1.5 If the project fails, the payoff equals zero, which leads to... more Derivation of E’s payoff at date 1.5 If the project fails, the payoff equals zero, which leads to no motivation for F to hold up E. Now, consider the case when the project is successful. If F can successfully fire E, then F ’s outside option by producing with E ′ equals A (given competitive labor markets, F gets the entire payoff in its bargaining with E′). If F cannot fire E, then F ’s outside option equals zero. Since F can fire E successfully with probability (1 − µ) , the expected value of F ’s outside option equals (1 − µ)A. Since E cannot produce without F, E’s outside option is always zero. Using 50:50 Nash bargaining, it follows that E’s payoff at date 1.5 equals 0.5µA. Lemma The optimal project maximizes the aggregate payoff of firm and employee.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Labor Laws and Innovation1

thank Hanh Le and Chandrasekhar Mangipudi for excellent research assistance. Labor Laws and Innov... more thank Hanh Le and Chandrasekhar Mangipudi for excellent research assistance. Labor Laws and Innovation Stringent labor laws can provide firms a commitment device to not punish short-run failures and thereby spur their employees to pursue value-enhancing innovative activities. Using patents and citations as proxies for innovation, we identify this effect by exploiting the time-series variation generated by staggered country-level changes in dismissal laws. We find that within a country, innovation and economic growth are fostered by stringent laws governing dismissal of employees, especially in the more innovation-intensive sectors. Firm-level tests within the United States that exploit a discontinuity generated by the passage of the federal Worker Adjustment and Retraining Notification Act confirm the cross-country evidence.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of 5-2018 Dismissal Laws , Innovation and Economic Growth

I theoretically and empirically show that dismissal laws laws that impose hurdles on firing of em... more I theoretically and empirically show that dismissal laws laws that impose hurdles on firing of employees spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees. Because innovation is inherently risky and employment contracts are incomplete, dismissal laws enable such commitment. Specifically, absent such laws, firms cannot contractually commit so ex-ante. The commitment provided by dismissal laws encourages employees to exert greater effort in risky, but path-breaking, projects thereby fostering firm-level innovation. I provide empirical evidence supporting this thesis using the discontinuity provided by the passage of the federal Worker Adjustment and Retraining Notification Act. Using the fact that this Act only applied to firms with 100 or more employees, I undertake difference-indifference and regression discontinuity tests t...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Borrowers’ Distress and Debt Relief: Evidence from a Natural Experiment

The Journal of Law and Economics, 2018

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Agency Costs of CEO Turnover in Banks: Evidence Using Exogenous Turnovers

SSRN Electronic Journal, 2015

We examine the effects of chief executive officer (CEO) turnover in banks. Incoming bank CEOs fac... more We examine the effects of chief executive officer (CEO) turnover in banks. Incoming bank CEOs face problems of information asymmetry because banks’ operations are opaque and bank risk can change dramatically in a short time. These CEOs may therefore change bank policies to manage their personal risks. Since CEO turnover is usually endogenous, we utilize a setting in which CEO turnover is based solely on retirement age and is thus exogenous to bank performance. Consistent with our thesis, incoming CEOs increase provisioning for future delinquencies and shrink lending. Bank stock prices decline following these changes. Politically motivated lending or ever-greening cannot explain our results.

Bookmarks Related papers MentionsView impact

Research paper thumbnail of The Color of Money: A Startup's Choice Among Venture Capitalists

SSRN Electronic Journal, 2012

Abstract: Venture Capitalists (VCs) differ significantly from one another with respect to the non... more Abstract: Venture Capitalists (VCs) differ significantly from one another with respect to the non-financial resources--from business expertise to the network of contacts with potential suppliers, customers, employees and IPO underwriters--they offer their portfolio firms. In ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of How Do Firm Capabilities Affect Their Boundary Decisions?: Theory and Evidence

SSRN Electronic Journal, 2004

I would like to thank my advisors – Marianne Bertrand, Wouter Dessein, Milton Harris, Raghuram Ra... more I would like to thank my advisors – Marianne Bertrand, Wouter Dessein, Milton Harris, Raghuram Rajan and especially Luigi Zingales for their encouragement, support and guidance and participants at the University of Chicago workshop on Theory of Organizations and the Corporate ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Employment Protection Laws and Privatization

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Law and Project Finance

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Does Education Affect Voting Preferences? Evidence from Voting Records in Indian Elections

SSRN Electronic Journal, 2014

Bookmarks Related papers MentionsView impact

Research paper thumbnail of CEO Turnover and Earnings Management in Banks: Evidence from India

SSRN Electronic Journal, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Deregulation of Bank Entry and Bank Failures

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Valuation of Private, Innovative Targets: Evidence from Cisco's Acquisitions

SSRN Electronic Journal, 2012

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Infrastructure and FDI: Evidence from District-Level Data in India

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Corporate Governance and Innovation: Theory and Evidence

SSRN Electronic Journal, 2011

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Can Mandatory Rotation Policy Distort Incentives? Evidence from Loan O fficer Rotation

SSRN Electronic Journal, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Bankruptcy Codes and Innovation

Review of Financial Studies, 2009

We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered fir... more We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing ...

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Wrongful Discharge Laws and Innovation

Review of Financial Studies, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Banking deregulation and innovation

Journal of Financial Economics, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Labor Laws and Innovation

The Journal of Law and Economics, 2013

Bookmarks Related papers MentionsView impact

Research paper thumbnail of Proof of Lemma: The optimal project choice is given by

Derivation of E’s payoff at date 1.5 If the project fails, the payoff equals zero, which leads to... more Derivation of E’s payoff at date 1.5 If the project fails, the payoff equals zero, which leads to no motivation for F to hold up E. Now, consider the case when the project is successful. If F can successfully fire E, then F ’s outside option by producing with E ′ equals A (given competitive labor markets, F gets the entire payoff in its bargaining with E′). If F cannot fire E, then F ’s outside option equals zero. Since F can fire E successfully with probability (1 − µ) , the expected value of F ’s outside option equals (1 − µ)A. Since E cannot produce without F, E’s outside option is always zero. Using 50:50 Nash bargaining, it follows that E’s payoff at date 1.5 equals 0.5µA. Lemma The optimal project maximizes the aggregate payoff of firm and employee.

Bookmarks Related papers MentionsView impact