Julien Sauvagnat

The Globalization Risk Premium

We investigate how the displacement risk associated with import competition is reflected in the cost of capital. We sort U.S. industries on their exposure to import competition, based on shipping costs. We find that output and employment in high exposure industries is more sensitive to tariff cuts than in low exposure industries, consistent with the idea that they face a higher risk of being displaced by import competition. We then show that high exposure industries have a higher cost of capital. We confirm displacement risk of import competition is priced and covaries with the marginal utility of the representative agent.

Prosecution and Leniency Programs: The Role of Bluffing in Opening Investigations: Prosecution and Leniency Programs: The Role of Bluffing

This paper characterizes the optimal investigation and leniency policies when the Competition Authority is privately informed about the strength of a cartel case. I show that the Competition Authority can then exploit firms’ uncertainty about the risk of conviction to obtain confessions even when the case is weak. More generally, I show that offering full leniency allows the Competition Authority to open more successful investigations (what I refer to as the ‘activism effect’ of leniency), which overall raises both cartel desistance and cartel deterrence. Finally, I discuss the policy implications of the model.

Takeover Discipline and Asset Tangibility

This paper studies the effect of corporate governance on the performance and growth of low-tangibility firms. The literature stresses the link between the tangibility of assets and the threat of liquidation. In support of the hypothesis that the liquidation threat acts as a disciplinary force, I find that good external corporate governance – measured through firm-level takeover defenses and state antitakeover laws – is associated with higher performance only for firms holding a large share of intangible assets. The analysis also reveals significant changes in firms’ use of external finance. Equity issues drop significantly for low-tangibility firms after the passage of antitakeover laws, which has real effects on their sales and asset growth.