Adam Walter Winegar

Journal of Financial and Quantitative Analysis p. 1-107 Doi: https://doi.org/10.1017/s0022109025102433

We use negative durability shocks from vehicle discontinuations to study asset-backed lending (ABL) and income-based lending (IBL) in auto finance. Discontinuations lead to increased down payments, higher loan-to-value ratios, and larger post-default personal recoveries. These results all indicate that economically disadvantaged consumers are relatively more reliant on unsecured IBL, in stark contrast to corporate financing patterns. Vehicle recoveries on discontinued cars are lower for borrowers who purchase after discontinuations, implying that depreciation is partially borrower-dependent. Our findings suggest that lower-income borrowers, in particular, benefit from technologies that facilitate IBL such as income monitoring.

Journal of Corporate Finance 91 p. 1-19 Doi: https://doi.org/10.1016/j.jcorpfin.2024.102707

A common method of calculating economic magnitudes is to multiply the regression coefficient of the variable of interest by its sample standard deviation. This method is often problematic in finance settings when researchers use granular fixed effects. We show that in many recently published finance papers and for many common finance variables, the sample standard deviation is much larger than the within-group variation that identifies the regression coefficient, and that within-group changes of this magnitude are rare. Without additional assumptions, this common approach can significantly inflate the economic magnitude of the identified effect and impact the comparison of effects among different variables of interest. We recommend using within-group measures of variation to improve the interpretation of economic magnitudes in this setting.

Journal of Financial Economics 154 Doi: https://doi.org/10.1016/j.jfineco.2024.103796

Capital ages and must eventually be replaced. We propose a theory of financing in which firms borrow to finance investment and deleverage as capital ages to have enough financial slack to finance replacement investments. To achieve these dynamics, firms issue debt with a maturity that matches the useful life of assets and a repayment schedule that reflects the need to free up debt capacity as capital ages. In the model, leverage and debt maturity are negatively related to capital age while debt maturity and the length of debt cycles are positively related to asset life. We provide empirical evidence that strongly supports these predictions.

The Review of Corporate Finance Studies Doi: https://doi.org/10.1093/rcfs/cfae010

This paper investigates whether acquisition prices reflect a specific set of nonpecuniary benefits preferred by entrepreneurs: the quality of life (QOL) associated with the business location. Using data on private firm acquisitions, we find that target firms in high-QOL cities sell for a 14% to 20% premium. Traditional financial factors do not explain this premium, which dissipates when the buyer is unlikely to have preferences for high-QOL locations. Using wage-to-housing cost differentials to decompose local amenities and data on migration patterns, we find that QOL amenities have a greater impact on entrepreneurs’ location decisions relative to wage workers. (JEL G02, G32, G34, J32, L26, R39)