Matthew G. Osborn

Curriculum Vitae

 

PhD Finance Candidate (2015)

Boston College, Carroll School of Management

 

Email:   osbornma@bc.edu

Cell:      202.306.3036

Office:  Fulton Hall 333

 

Research Interests:

Empirical Corporate Finance; Banking; Financial Distress; Derivatives

 

 

 

“The Cost of Easy Credit: Loan Contracting with Non-Bank Investors” (Job Market Paper)

 

I study how the rise of non-bank loan investment from CLOs, mutual funds, and hedge funds influenced contracting relationships between firms and their senior lenders.  Contrary to common perception that non-bank investors diluted the incentive for banks to monitor firms, I find evidence that bank underwriters embraced tighter contracts to mitigate agency and holdout problems associated with less-informed and dispersed non-bank investors.  Using a novel measure for covenant tightness, I find that firms with non-bank loan funding had tighter covenants than otherwise similar firms with exclusively bank-funded loans at the peak of the credit cycle in 2007.  Consistent with tighter covenant thresholds, I find that these firms were also more likely to renegotiate and violate covenants during the subsequent crisis.  While recent studies show that non-bank loan investors lowered the cost and expanded the availability of capital ex ante, I conclude that tighter contracts assigned stronger control rights to lenders and imposed higher renegotiation costs to firms in a state-contingent manner ex post.

 

“Cashing out: The Rise of M&A in Bankruptcy” (with Stuart Gilson and Edith Hotchkiss)

 

The use of M&A in bankruptcy has increased dramatically in recent years, leading to concerns that the Chapter 11 process has shifted toward excessive liquidation of viable firms.  In this paper, we argue that the rise of M&A has blurred traditional distinctions between “reorganization” and “liquidation.” We examine the drivers of M&A activity, based on factors specific to Chapter 11 as well as more general factors that drive M&A waves for non-distressed firms. M&A in bankruptcy is counter-cyclical and is more likely when exit financing is expensive relative to acquirer financing, particularly for firms in financially dependent industries and during industry shocks. Consistent with a senior creditor liquidation bias, the greater use of secured debt leads to more sales in bankruptcy -- but, this result holds only for sales that preserve going concern value. We also show that overall creditor recovery rates are higher, and unsecured creditor recoveries and post-bankruptcy survival rates are not different, when bankrupt firms sell businesses as going concerns.

 

“Analyst Promotions within Credit Rating Agencies: Bias or Skill?” (with Darren Kisgen and Jonathan Reuter)

 

Using hand-collected data on Moody’s analyst names, titles, and companies covered, we examine whether credit rating analysts are rewarded based on ratings bias or accuracy.  Analysts who disproportionately downgrade firms compared to the corresponding S&P rating are less likely to be promoted.  Further, analysts who downgrade firms leading to significantly negative announcement returns are also less likely to be promoted.  On the other hand, analysts who provide pessimistic ratings that turn out to be accurate are more likely to be promoted.  We conclude that Moody’s punishes analysts for negativity unless they can demonstrate clear accuracy with those ratings.