Rebecca Zarutskie

Evidence on the Effects of Bank Competition on Firm Borrowing and Investment

This paper presents evidence on the financial and real effects of bank competition using a large panel of privately held firms. I trace the firm-level impact of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which increased the competitiveness of U.S. banking markets. Following the deregulation, newly formed firms used significantly less external debt, were smaller, and realized higher returns on assets, consistent with their investing less due to greater financial constraints. These effects diminish as firms age, ultimately reversing sign. The differential impact that banking market reforms may have on newer and more established firms is underscored.

Who Works for Startups? The Relation between Firm Age, Employee Age and Growth

We present evidence that young employees are an important ingredient in the creation and growth of firms. Our results suggest that young employees possess attributes or skills, such as willingness to take risk or innovativeness, which make them relatively more valuable in young, high growth, firms. Young firms disproportionately hire young employees, controlling for firm size, industry, geography and time. Young employees in young firms command higher wages than young employees in older firms and earn wages that are relatively more equal to older employees within the same firm. Moreover, young employees disproportionately join young firms that subsequently exhibit higher growth and raise venture capital financing. Finally, we show that an increase in the regional supply of young workers increases the rate of new firm creation. Our results are relevant for investors and executives in young, high growth, firms, as well as policymakers interested in fostering entrepreneurship.

Business Investor Activity in the Single-Family-Housing Market

We discuss recent purchase activity by business investors in the market for single-family homes and consider the possible benefits and risks of this activity.

Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market: The Emergence of a New Asset Class: Large-Scale Buy-to-Rent Investors in the Single-Family Housing Market

In 2012, several large firms began purchasing single-family homes, creating large portfolios of rental property, and securitizing these investments in capital markets. We present the first systematic evidence on this new investor activity in order to shed light on the factors that have supported its emergence. Three key factors were the ample supply of property for sale, tight mortgage financing, and a decrease in acquisition and managerial costs brought about by technological advances. In addition, we show that buy-to-rent investors appear to have supported house prices in the neighborhoods where they concentrated. This article is protected by copyright. All rights reserved

Going Entrepreneurial? IPOs and New Firm Creation

We examine the human capital of IPO-filing firms and how going public affects their labor force. IPO-filing firms have high average wages and limited industrial diversification. Moreover, we document that a successful IPO increases departures of high-skilled employees to startups and diversification though employment growth in non-core industries. While IPOs do not significantly affect earnings growth of pre-IPO workers, post-IPO hires receive larger earnings increases upon joining. These results are most consistent with agency mechanisms associated with the transition to public ownership. Overall, going public has significant implications for the firms’ overall labor force, the firm, and labor reallocation.

Quitting Time: Manager's Age and the Performance of Closely Held Firms

Using detailed ownership and financial information available for a large sample of owner-managed private firms in three West European countries, this paper examines the relationship between managers age and firms performance. Tracking firms over time, we find that as a manager ages, the firm experiences slower growth and a decline in investment, especially when a manager gets closer to retirement age. These results are stronger in industries more reliant on human capital, such as service and creative industries. Moreover, older managers are less likely to adopt managerial practices associated with better firm performance. Regional financial development moderates the relationship between a managers age and a firms performance. Fewer firms in more financially developed regions have older managers and in those regions the adverse effect of older managers is less pronounced. Our findings point to the importance of financial markets in facilitating the reallocation of assets from firms with older to firms with younger managers.