The 2021 conference was held virtually. Attendance is invite-only and has limited space (email [email protected] for more info). All times Pacific.
Paper presentations are 40 minutes. The first 30 minutes will be seminar-style, with limited interruptions for clarifying questions, moderated by one of the co-organizers. This is followed by 10 minutes of Q&A for more substantial questions. We encourage everyone to have on their video. Our break at “lunch” will have 3 open breakout rooms.
10:25am: Introductions and logistics.
Paper 1 10:30-11:10am: “Capital Commitment” Elise Gourier (ESSEC Business School and CEPR), Ludovic Phalippou (University of Oxford, Said Business School) and Mark M. Westerfield (University of Washington, Foster Business School)
Abstract: Eight trillion dollars are allocated to illiquid vehicles for which investors commit ex-ante to transferring capital on demand. We extend the standard Merton optimal dynamic portfolio allocation model to include capital commitments to illiquid assets. We find that capital commitment can trigger a flight to safety in bad times, which may exacerbate downturns. Properly anticipated liquidity shocks have small premiums because they can be avoided, whereas unanticipated shocks may be costly. Liquidity premiums increase with time diversification because of a possible funding mismatch, and with access to a secondary market.
11:10-11:20: Coffee break
Paper 2 11:20am-12:00pm: “Private Equity and Financial Stability: Evidence from Failed Bank Resolution in the Crisis” Emily Johnston-Ross (FDIC), Song Ma (Yale) and Manju Puri (Duke)
Abstract: Using proprietary failed bank acquisition data from the FDIC combined with data on private equity (PE) investors, we investigate PEs’ role in the resolution of failed banks during the crisis. We show PE acquisitions were economically important with PEs acquiring underperforming and riskier failed banks. Our evidence suggests that PEs helped channel capital to failed banks at a time when local banks, the “natural” potential bank acquirers, were themselves distressed. These acquisitions accounted for a quarter of all failed bank assets acquired. Using a quasi-random empirical design to examine ex-post performance and real effects, we find that PE-acquired banks performed better subsequent to the acquisition, and that this, in turn, benefited local economic recovery. Our results suggest that PEs had a positive role in stabilizing the financial system in the crisis through their involvement in failed bank resolution.
12:00pm – 12:40pm: Lunch break
Abstract: We provide the first analysis of the risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a new dataset of impact fund cash flows constructed directly from financial statements. When accounting for market risk exposure, impact funds underperform the market by $0.30 on the dollar, but outperform VC funds by $0.15 on the dollar. We exploit known distortions in measures of venture capital (VC) performance to characterize the risk profile of impact funds. Impact funds have substantially lower market beta than VC funds, contradicting the idea of impact as a “luxury good.” Impact fund returns are not spanned by the market and a public sustainability factor.
Paper 4 1:30-2:10pm: “Crowd-Based Rankings and Frictions in New Venture Finance” by Ruiqing Cao (HBS)
Abstract: Using detailed data from a prominent online platform that generates noisy market traction measures for technology startup launches by aggregating user upvotes into rankings, I find that information acquisition frictions affect venture capital investors’ funding decisions. By exploiting an instrument based on the ex-ante quality and quantity of supply of other products, I identify that each exogenous shift to ranking lowers a startup’s probability of raising venture funding by 4.8% within a year, and reduces its chance of raising from brand- name VCs. Consistent with theoretical predictions, higher-ranked products and startups farther away from VCs are more affected by ranking frictions.