Emanuele Colonnelli
Job Market Candidate

Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305
+1 (650) 575-9917

Curriculum Vitae

Corporate Finance and Development

Expected Graduation Date:
June, 2018

Thesis Committee:
Shai Bernstein:

Nick Bloom:

Pascaline Dupas:

Josh Rauh:

Amit Seru:

Working Papers

Corruption and Firms: Evidence from Randomized Audits in Brazil [Job Market Paper]
with Mounu Prem
[Awarded grants from Stanford Institute for Innovation in Developing Countries, Center for Economic Policy Research PEDL, Stanford Center for International Development, Stanford IRiSS, JPAL]
[Best Paper Award at USC Marshall Finance PhD Conference (co-winner)]

Abstract: We exploit spatial variation in randomized anti-corruption audits related to government procurement contracts in Brazil to assess how corruption affects resource allocation, firm performance, and the local economy. After an anti-corruption crackdown, regions experience more entrepreneurship, improved access to finance, and higher levels of economic activity. This is inconsistent with corruption acting as ``grease in the wheel.'' We find that two channels explain these facts: allocation of resources to less efficient firms, and distortions in government dependent firms. Using firms involved in corrupt business with the municipality, i.e. ``corrupt firms,'' we find that the second channel is more important. Difference in difference estimation suggests that, after audits, the performance of corrupt firms improves relative to a similar set of unaffected firms. Corrupt firms invest more, increase borrowing and leverage, reallocate labor inside the firm, restructure the organizational design by increasing hierarchical layers, rely less on government contracts, and grow faster. Our findings provide novel micro-evidence on why corruption acts as an institutional failure that is detrimental to firm performance and economic growth.

Asset Allocation in Bankruptcy [Forthcoming at the Journal of Finance] [Online Appendix]

with Shai Bernstein and Benjamin Iverson

Abstract: This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy and employment at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to an inefficient allocation of assets in bankruptcy.

Bankruptcy Spillovers [R&R at the Journal of Financial Economics]

with Shai Bernstein, Xavier Giroud and Benjamin Iverson

Abstract: How do different bankruptcy approaches affect the local economy? Using U.S. Census microdata, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of exogenous variation in the probability of liquidation. We find that employment declines substantially in the immediate neighborhood of the liquidated establishments, relative to reorganized establishments. The spillover effects are highly localized and concentrate in non-tradable and service sectors, consistent with a reduction in local consumer traffic and a decline in knowledge spillovers between firms. The evidence highlights the externalities that bankruptcy design can impose on non-bankrupt firms.

Marginal Entrepreneurs
(Current draft: October 2017, available upon request)
with Shai Bernstein, Davide Malacrino and Tim McQuade
[Awarded grants from Stanford Institute for Innovation in Developing Countries]

Abstract: New firms are a critical driver of job creation and economic growth. Using employer-employee matched data from Brazil, we study the characteristics of marginal entrepreneurs, those individuals who respond to economic opportunities by starting new businesses. Exploiting an identification strategy that links fluctuations in global commodity prices to municipality level agricultural endowments, we find that within a municipality, marginal entrepreneurs are young, skilled, and have little accumulated wealth and thus likely to be financially constrained. These individuals are most impacted by the local availability of finance. Municipalities with greater access to finance experience a larger response of marginal entrepreneurs, when economic opportunities arise. This evidence sheds light on the mechanisms through which finance drives entrepreneurial activity.

Patronage in the Allocation of Public Sector Jobs

with Edoardo Teso and Mounu Prem
[Awarded grants from Harvard IQSS, Harvard Pershing Square Venture Fund]

Abstract: This paper studies patronage - the use of public sector jobs to reward political supporters of the party in power - in Brazilian local governments. We exploit longitudinal data on the universe of Brazilian public sector employees over the 1997-2014 period, matched with information on more than 2,000,000 political supporters of Brazilian local parties. Using a regression discontinuity design that generates exogenous variation in individuals' connection to the party in power, we first document the presence of significant political favoritism in the allocation of jobs throughout the entire Brazilian public sector hierarchy: being a political supporter of the party in power increases the probability of having a public sector job by 10.5 percentage points (a 47% increase). Leveraging detailed information on supporters' and jobs' characteristics, we then show that patronage is the leading explanation behind this favoritism: jobs in the public sector are used as reward for political supporters. We find that patronage has significant real consequences for selection to public employment, as the amount of support provided to the party in power substitutes qualifications as determinant of hiring decisions. Finally, consistent with this negative impact on the quality of the selected public workers, we present evidence suggesting that patronage practices are associated with a worse provision of public services.

Work in Progress

Corporate Reputation, Firm Value, and Business Networks: Evidence from A Randomized Anti-corruption Campaign in Uganda
with Francesco Loiacono and Mounu Prem
[Awarded grants from International Growth Centre, Center for Economic Policy Research PEDL, Stanford Center for International Development, JPAL]

Abstract: We designed a randomized information intervention with Uganda's anti-corruption agency aiming to study the role of reputation and government monitoring in shaping firm-to-firm networks. We rely on rich novel administrative data on 250,000 public procurement contracts, and we conduct comprehensive face-to-face surveys of 3,000 firms doing business with 200 government agencies in 2013-2017. For each firm, we also measure their business and information networks, and we subsequently survey all firms in such networks. Baseline data collection is currently ongoing.

Political Uncertainty, Entrepreneurship, and Labor Reallocation Within Firms: Evidence from Brazil
[Awarded grants from Center for Economic Policy Research PEDL]
[Awarded Kauffman Foundation Dissertation Fellowship in Entrepreneurship]

Abstract: I study how local political cycles influence entrepreneurial activity and firm dynamics in Brazil, and how multi-establishment firms reallocate labor across establishments depending on the relative political attractiveness of locations. I use matched employer-employee data and the universe of corporate contributions to political campaigns at the municipal, state, and federal level, and I rely on various measures of ideology of political candidates to qualify elections based on their level of uncertainty. The identification strategy relies on a regression discontinuity design of close electoral races during 2000-2014. Preliminary findings show that political cycles affect entrepreneurship as well as within firm labor reallocation of politically active firms.

Corporate Misconduct, Firm Growth, and Labor Reallocation: Evidence from Brazil
with Mounu Prem

Abstract: We study the impact of corporate misconduct on firm performance and labor reallocation in Brazil. Using a novel dataset on firms' suspensions from participating in public procurement, combined with employer-employee and other administrative datasets, preliminary findings show that firms are more likely to exit and, conditional on survival, shrink significantly after suspensions. The results hold when comparing suspended firms to multiple sets of similar firms doing business with the government, and when using an identification strategy that relies on unsuccessful prosecutions. We investigate the impact of firm suspensions on its employees, and find evidence of a negative "stigma" effect on their earnings. The effects vary significantly across organizational layers of the firms and across individual characteristics. These preliminary findings suggest that government contracts are an important source of business that firms cannot easily substitute for, and that employees bear significant costs of firm misconduct.