David Thesmar

Bio: David Thesmar is an academic researcher from Massachusetts Institute of Technology. The author has contributed to research in topics: Stock market & Debt. The author has an hindex of 41, co-authored 161 publications receiving 7242 citations. Previous affiliations of David Thesmar include Capital Fund Management & Economic Policy Institute.

Performance and behavior of family firms: evidence from the french stock market

Abstract: This paper empirically documents the performance and behavior of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, whereas the remaining two thirds are family firms. We find that, in the cross-section, family firms largely outperform widely held corporations. This result holds for founder-controlled firms, professionally managed family firms, but more surprisingly also for firms run by descendants of the founder. We offer explanations for the good performance of family firms. First, we present evidence of a more efficient use of labor in heir-managed firms. These firms pay lower wages, even allowing for skill and age structure. We also find that descendants smooth out industry shocks and manage to honor implicit labor contracts. Second, we present evidence consistent with outside CEOs in family firms making a more parsimonious use of capital. They employ more unskilled, cheap labor, use less capital, pay lower interest rates on debt and initiate more profitable acquisitions. (JEL: G32, L25, J31)

Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985

Abstract: We investigate how the deregulation of the French banking industry in the 1980s affected the real behavior of firms and the structure and dynamics of product markets. Following deregulation, banks are less willing to bail out poorly performing firms and firms in the more bank-dependent sectors are more likely to undertake restructuring activities. At the industry level, we observe an increase in asset and job reallocation, an improvement in allocative efficiency across firms, and a decline in concentration. Overall, these findings support the view that a more efficient banking sector helps foster a Schumpeterian process of “creative destruction.” MANY ECONOMIES AROUND THE WORLD are characterized by heavily regulated bank

The Collateral Channel: How Real Estate Shocks Affect Corporate Investment

Abstract: What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each $1 of collateral.

Identifying Dynamic Discrete Decision Processes

Abstract: In this paper, we analyze the nonparametric identification of dynamic discrete choice models. Our methodology is based on the insight of Hotz and Miller (1993) that Bellman equations can be interpreted as moment conditions. We consider cases with and without unobserved heterogeneity. Not only do we show that these models are not identified (Rust (1994)), we are also able to determine their exact degree of underidentification. We begin with the case without correlated unobserved heterogeneity. Using Bellman equations as moment conditions, we show that utility functions in each alternative cannot be (nonparametrically) identified as long as the following structural parameters are not set: the distribution function of unobserved preference shocks, the discount rate, and the current and future preferences in one (reference) alternative. We also investigate how exclusion or parametric restrictions can provide identifying restrictions. As the identification proof is constructive, a simple method of moment estimator can be derived and overidentifying restrictions can be tested. Provided that one is willing to make stronger identifying assumptions, dynamic discrete choice modelling is thus little different from the continuous case. Bellman equations can be used to recover deep structural parameters as are Euler equations. We continue by exploring a case where the unobserved component of preferences is correlated over time. Even if the functional degree of underidentification of this model is larger, we present reasonable identifying assumptions that lead to the same identification results as without unobserved heterogeneity. The same methodology using moment conditions is applied. This paper expands upon the work in Rust (1994), where the generic nonidentification result is stated. We use a slightly different model. In our case, agents' preferences have unobservable and possibly persistent components. The constructive aspect of our proof allows us to interpret Rust's underidentification result and to propose identifying restrictions. On the technical side, the insights for our identification strategy are borrowed from the works of Hotz and Miller (1993), Hotz et al. (1994), and Altug and Miller (1998). We

The Collateral Channel: How Real Estate Shocks affect Corporate Investment

Abstract: What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each $1 of collateral.

The Skill Content of Recent Technological Change: An Empirical Exploration

Abstract: We apply an understanding of what computers do to study how computerization alters job skill demands. We argue that computer capital (1) substitutes for workers in performing cognitive and manual tasks that can be accomplished by following explicit rules; and (2) complements workers in performing nonroutine problem-solving and complex communications tasks. Provided these tasks are imperfect substitutes, our model implies measurable changes in the composition of job tasks, which we explore using representative data on task input for 1960 to 1998. We find that within industries, occupations and education groups, computerization is associated with reduced labor input of routine manual and routine cognitive tasks and increased labor input of nonroutine cognitive tasks. Translating task shifts into education demand, the model can explain sixty percent of the estimated relative demand shift favoring college labor during 1970 to 1998. Task changes within nominally identical occupations account for almost half of this impact.

Technical Change, Inequality, and the Labor Market

Abstract: This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentieth century developments, most technical change during the nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth-century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skill-complementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.

Technical Change, Inequality, and the Labor Market

Abstract: This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in inequality is most likely due to an acceleration in skill bias. In contrast to twentieth-century developments, much of the technical change during the early nineteenth century appears to be skill-replacing. I suggest that this is because the increased supply of unskilled workers in the English cities made the introduction of these technologies profitable. On the other hand, the twentieth century has been characterized by skill-biased technical change because the rapid increase in the supply of skilled workers has induced the development of skillcomplementary technologies. The recent acceleration in skill bias is in turn likely to have been a response to the acceleration in the supply of skills during the past several decades.