Krishnamurthy Subramanian

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Bankruptcy Codes and Innovation Do legal institutions governing financial contracts affect the nature of real investments in the economy? We develop a simple model and provide evidence that the answer to this question is yes. We consider a levered firm’s choice of investment between innovative and conservative technologies, on the one hand, and of financing(More)
We study how firm characteristics evolve from early business plan to initial public offering (IPO) to public company for 50 venture capital (VC)-financed companies. Firm business lines remain remarkably stable while management turnover is substantial. Management turnover is positively related to alienable asset formation. We obtain similar results using all(More)
Labor Laws and Innovation We show that dismissal laws – laws that prevent employers from arbitrarily discharging employees – spur firm-level innovation. Dismissal laws limit employers’ ability to hold up innovating employees after an innovation is successful. By reducing the possibility of hold-up, these laws enhance employees’ innovative efforts and(More)
We develop a theory of the e¤ects of external corporate governance mechanisms — such as takeover pressure — and internal mechanisms — such as compensation contracts and monitoring intensity — on innovation. Our theory generates the following testable predictions: (i) innovation varies non-monotonically in a U-shaped manner with takeover pressure; (ii)(More)
We document empirical support for a key micro-level channel—innovation by young, private firms—through which financial sector deregulation affects economic growth. We find that intrastate banking deregulation, which increased the local market power of banks, decreased the level and risk of innovation by young, private firms. In contrast, interstate banking(More)
We study the impact of a powerful non-financial stakeholder – unionized workers – on the pricing of corporate debt. Firms in more unionized industries have lower bond yields. This relation is stronger in firms with weaker financial conditions and cannot be explained by the correlation of unionization with industry characteristics, governance mechanisms, or(More)
The theory in this paper highlights the trade-offs that knowledge intensive firms confront when deciding among mergers/acquisitions, joint ventures, alliances, and arm’s length contracts. I define a knowledge intensive firm as a collection of the knowledge assets that it owns and the agents who have full access to such assets. Therefore, boundary decisions(More)
We investigate Project Finance as a private response to ineffi ciencies created by weak legal protection of outside investors. In the context of large investment projects, we offer a new illustration that law matters by demonstrating that Project Finance provides a contractual and organizational substitute for investor protection laws. Project Finance(More)
Is bank financing compatible with innovation? We provide evidence that banks – particularly those experienced in lending to innovative firms – recognize the value of a firm’s intellectual property, as concretized by patent stock, and provide cheaper loans ex-ante. If covenants are violated ex-post, experienced lenders are judicious in exercising control(More)