Felipe Restrepo

• Busaba, W. Y.; Restrepo, F., 2022, "“The 7% Solution” and IPO (Under)Pricing", Journal Of Financial Economics
  Abstract: We investigate the effect of the “7% solution”—the fact that underwriters in the U.S. charge a 7% spread to most IPOs between $20 million and $100 million in size—on the ensuing pricing of the offerings. Our identification exploits the variation in spreads that is due to distinct kinks in the relation between spread and offer size at these two thresholds. We find that the spread positively influences underpricing but also the offer-price adjustment from the filing range’s midpoint. Our evidence indicates that the spread influences the aftermarket price, suggesting that underwriters can shape, not merely discover, investor valuations.

  Link(s) to publication:

  https://www.sciencedirect.com/science/article/pii/S0304405X21003111#:~:text=Introduction,%2420%20million%20and%20%24100%20million.

  http://dx.doi.org/10.1016/j.jfineco.2021.06.041

• Restrepo, F.; Taillard, J. P., 2022, "Private firms’ incentives and opportunities to manage earnings: Evidence from the use of inflation adjustments", Journal of Business Finance & Accounting, January 49(1-2): 69 - 110.
  Abstract: We examine the behavior of a large sample of private firms before and after the elimination of an inflation adjustment system in Colombia in 2007. We find that firms avoid reporting small pre-tax losses by exercising considerable discretion in their use of inflation adjustments and find that this discretion is greater for firms that rely more on bank financing. Furthermore, firms that manage earnings to report small positive profits issue more bank debt the year following the reporting. After the law change, firms resort to other means to report positive earnings. In particular, the use of non-operating earnings increases, attributable in part to a higher incidence of tangible asset sales.

  Link(s) to publication:

  https://onlinelibrary.wiley.com/doi/10.1111/jbfa.12564

  http://dx.doi.org/10.1111/jbfa.12564

• Busaba, W. Y.; Liu, Z.; Restrepo, F., 2020, "Do Underwriters Price-Up IPOs to Prevent Withdrawal?", Journal of Financial and Quantitative Analysis, September 55(6): 2005 - 2036.
  Abstract: We examine whether underwriters price-up weakly-demanded IPOs to prevent withdrawal. Our empirical strategy exploits a discontinuity in the distribution of IPO prices around the low boundary of the filing range. Offerings with a high ex-ante withdrawal probability that are priced at this boundary are likely priced-up to meet issuers’ reservation prices. We compare the aftermarket returns of these IPOs to the returns of other weakly-demanded offerings where issuers’ reservation prices were likely not binding, and identify a negative 8.4-percentage point differential attributable to the aggressive pricing inherent in setting the price at the low boundary when withdrawal risk is high.

  Link(s) to publication:

  http://dx.doi.org/10.1017/S0022109019000553

• Restrepo, F.; Cardona-Sosa, L.; Strahan, P. E., 2019, "Funding Liquidity Without Banks: Evidence from a Shock to the Cost of Very Short-Term Debt", Journal Of Finance, December 74(6): 2875 - 2914.
  Abstract: In 2011, Colombia instituted a tax on repayment of bank loans, thereby increasing the cost of short-term bank credit more than long-term credit. Firms responded by cutting their short-term loans for liquidity management purposes and increasing their use of cash and trade credit. In industries where trade credit is more accessible (based on U.S. Compustat firms), we find substitution into accounts payable and little effect on cash and investment. Where trade credit is less available, firms increase cash and cut investment. Thus, trade credit offers a substitute source of liquidity that can insulate some firms from bank liquidity shocks.

  Link(s) to publication:

  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2915349

  http://dx.doi.org/10.1111/jofi.12832

• Restrepo, F., 2019, "The Effects of Taxing Bank Transactions on Bank Credit and Industrial Growth: Evidence from Latin America", Journal of International Money and Finance, May 93: 335 - 355.
  Abstract: This paper studies the bank credit and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

  Link(s) to publication:

  http://dx.doi.org/10.1016/j.jimonfin.2019.02.005

• Almeida, H.; Cunha, I.; Ferreira, M.; Restrepo, F., 2017, "The Real Effects of Credit Ratings: The Sovereign Ceiling Channel", Journal of Finance, January 72(1): 249 - 290.
  Abstract: We show that sovereign debt impairments can have a significant impact on financial markets and real economies through a credit ratings channel. Specifically, we find that firms reduce their investment and reliance on credit markets due to a rising cost of debt capital following a sovereign rating downgrade. We identify these effects by exploiting exogenous variation on corporate ratings due to rating agencies' sovereign ceiling policies that require firms' ratings to remain at or below the sovereign rating of their country of domicile.

  Link(s) to publication:

  http://dx.doi.org/10.1111/jofi.12434

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