Review of Corporate Finance Studies. March 2026.
with Daniel te Kaat and Yuanjie Tian, ADB Working Paper (754), 2024, CAMA Working Paper 46/2025, and Asia-Pacific Climate Report 2024 Background Paper
Using granular data on global investment funds in difference-in-differences regressions around the announcement of the US Inflation Reduction Act (IRA), we identify a novel international spillover channel of green industrial policies. Sustainable global investment funds received more inflows with the act announcement, in turn increasing their cross-border portfolio investments worldwide. Recipient economies better prepared to address climate change benefited most from sustainable global funds’ additional investments. Our results are stronger for funds with a larger portfolio share invested in the United States and in IRA-targeted industries. Yet, we see strong international spillovers even for non-US-domiciled sustainable funds investing entirely outside the US. Thus, global investment funds have become an important conduit for the international spillover of climate policies.
Media coverage: ADB blog, ADBI webinar
IMF Economic Review. September 2024. Vol 72, Issue 4: 1279-1319.
with Christiane Kneer, Bank of England Working Paper (804), CUREM Working Paper (1), Graduate Institute Working Paper (10-2019), and UZH Working Paper (326)
This paper examines how UK banks channel foreign capital to the individual sectors of the domestic economy and to overseas residents. Information about the source countries of foreign funds deposited with UK banks allows us to construct a novel Bartik instrument for capital flows. Our results suggest that foreign inflows boost bank lending to the domestic economy. This is driven by the positive effect of foreign inflows on bank lending to non-financial firms and to other domestic financial institutions. We find that banks do not channel capital inflows to households or the public sector. Much of the foreign capital is also channeled back abroad, reflecting the role of the UK as a global financial center.
Media coverage: Bank Underground, Yale School of Management
with Daniel te Kaat and Jiancong Liu, ADB Working Paper (forthcoming), 2026
How do investors react to geopolitical risk? Using granular data on investment funds' holdings, we show that funds stabilize markets amid geopolitical tensions. As geopolitical risk intensifies, stock prices of more exposed firms decline, inviting funds to buy these stocks. Thus, valuations recover swiftly. No particular industry accounts for this search-for-yield driven fund reallocation, including defense and dual use production. The valuation stabilization rises in the intensity of geopolitical shocks. The behavior of fund managers contrasts with ultimate investors who withdraw from geopolitical risk-exposed funds as risks increase.
with Matteo Ficarra, ADB Working Paper (forthcoming), 2026
How should debt issuance strategies account for disasters? We answer this question by combining detailed data on two decades of sovereign bond issuances worldwide with economic costs of climate-change related disasters. We show that sovereign borrowing costs increase in response to disasters, but the effect is declining in the time from disaster to bond issuance. Specifically, realized disaster risk raises sovereign yields and spreads beyond investors’ expectations of disaster vulnerability. Investors’ recency bias reduces the premium for disasters in the more distant past, and on average by two fifths of the previous disaster-induced increase. Disaster insurance further reduces the premium.
Media coverage: ADB blog, BCC blog, Business World Online, China Daily, Daily FT, Grand News Asia, UZ Daily
with Daniel te Kaat, Accountability in a Sustainable World Quarterly. Volume 4, Issue 2 (March 2026)
How do international investors adjust portfolios in response to biodiversity risk? Using monthly data on investment fund portfolios, we show that the 2021 Kunming Declaration led fund managers to reallocate portfolios from high-biodiversity risk countries to less risky ones, while ultimate fund investors remained unresponsive. Fund managers reduced exposures to extremely high biodiversity risk without seizing low biodiversity risk as an opportunity for profit, characterizing biodiversity as downside risk factor. Investment funds drive cross-country spillovers as the reallocation triggers significant capital flows benefiting countries in the same geographic region, but outside of a fund’s hitherto established portfolio. Using a novel measure of legal action to protect nature, we demonstrate that countries taking more legal acts are partially shielded from funds reducing their exposure to high-biodiversity risk countries. Policies only indirectly related to nature conservation, such as mitigating climate change and strengthening macroeconomic fundamentals, do not provide insurance against funds’ withdrawals. Results are robust to a rich set of controls and fixed effects, absorbing demand for funds' investments.
with Torsten Ehlers and Mathias Hoffmann, BIS Working Paper (897), 2020, BIS Working Paper (1332), 2026, UZH Working Papers (374) and (480), Graduate Institute Working Paper (18-2020) and CAMA Working Paper 56/2025
We show that US net capital inflows drive the international synchronization of house price growth through the topography of the global banking network. US net capital inflows improve US dollar funding conditions of non-US and specifically European global banks, allowing them to increase leverage by borrowing in US dollars and to expand foreign interbank lending to borrowing countries. This induces a synchronization of lending across borrowing countries, which translates into a synchronization of mortgage credit growth and ultimately house price growth. Importantly, this synchronization is driven by non-US global banks' common but heterogeneous exposure to US dollar funding conditions, not by the common exposure of borrowing countries to non-US global banks. Our results therefore identify a novel channel of international transmission of US dollar funding conditions: As these conditions vary over time, borrowing country pairs whose non-US global creditor banks are more dependent on US dollar funding exhibit higher house price synchronization.
Media coverage: BCC blog, Central Banking, Graduate Institute Geneva
Sinking safe-haven: no more US exorbitant privilege?, with Gabriele Ciminelli and Jiancong Liu
Fund allocations amid geopolitical risk: patterns by UN voting affinity, with Gabriele Ciminelli and Xinran Zhou
Patronage pays: network power and equity markets
Paying for biodiversity loss: how biodiversity risk drives sovereign yields, with Dhruv Patel
Weak banks make you feel the heat: how non-performing loans delay the green transition, with Jiancong Liu
How to stimulate private development finance: catalytic effects of MDBs, with Jiancong Liu and Marcin Wolski
Forecasting economic crises: a machine learning approach, with Mattia Bevilacqua and Yating Ru