LANDIER Augustin

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We analyze firm-level analyst forecasts during the COVID crisis. First, we describe expectations dynamics about future corporate earnings. Downward revisions have been sharp, mostly focused on 2020, 2021 and 2022, but much less drastic than the lower bound estimated by Gormsen and Koijen (2020). Analyst forecasts do not exhibit evidence of over-reaction: As of mid-May, forecasts over 2020 earnings have progressively been reduced by 16%. Longer-run forecasts, as well as expected “Long-Term Growth” have reacted much less than short-run forecasts, and feature less disagreement. Second, we ask how much discount rate changes explain market dynamics, in an exercise similar to Shiller (1981). Given forecast revisions and price movements, we estimate an implicit discount rate going from 10% in mid-February, to 13% at the end of March, back down to their initial level in mid-May. We then decompose discount rate changes into three factors: changes in unlevered asset risk premium (0%), increased leverage (+1%) and interest rate reduction (-1%). Overall, analyst forecast revisions explain most of the decrease in equity values between January 2020 and mid May 2020, but they do not explain shorter term stock market movements.

This paper develops a general equilibrium model of a productive economy with negative externalities. Investors are not willing to accept lower returns than their best investment alternatives and entrepreneurs maximize profits. If capital markets are subject to a search friction, an ESG fund can raise assets and improve social welfare despite the selfishness of all agents. The presence of the ESG fund forces companies to partially internalize externalities. We derive the fund's optimal policy in terms of industry allocation and pollution limits imposed to portfolio companies. The fund prioritizes investments in companies where (i) the inefficiency induced by the externality is particularly acute and (ii) the capital search friction is strong. We also show that the ESG fund can take advantage of the supply-chain network: It can amplify its impact by imposing restrictions on the suppliers of the firms where it invests.

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We measure how shareholders value a firm's ethical actions via an experiment. Our findings are threefold. First, the "selfish investor hypothesis'' is strongly rejected. Participants are willing to pay $ .7 more for buying a share in a firm giving one more dollar per share to charities. Symmetrically, a firm that makes profits by exercising a negative externality of $1 on a charity is valued $.9 less than a similar company with no externality. The scaling of non-pecuniary preferences is linear: doubling the size of a social externality doubles its impact on willingness to pay. Second, the data show that whether investors are pivotal or not with regard to the ethical actions of the firm does not affect their willingness to pay. Third, when participants make investment decisions on behalf of a third party (delegation), their generosity level remains similar. Our results appear to be compatible with a utility model where non-pecuniary benefits are conditional on stock holding.

The French abstract was not provided by the author.

The 4th cover says: "Our era is constantly hesitating between a blissful technophilia and the fear of a digital apocalypse. However, if some of our uses are undeniably evolving, the fundamentals remain. We take cabs less and Uber more, but we still get from point A to point B! We subscribe to Spotify or Deezer. but we don't spend more time listening to music than before. In reality, say Jobic de Calan and Jérôme Cauchard, we are witnessing a shift in values rather than an overall increase in them. If our world is transforming, it is doing so without any real rupture or reinvention. Digital is a media giant but an economic "Little Thumb". This fascinating book aims to bring the "digital revolution" back to its rightful place, without denigrating it, and to help us understand the stakes involved in an omnipresent technology and to decipher a society that often favors speeches over facts, and hysteria over reason and analysis.

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We propose a theory of one of the most economically significant stock market anomalies, i.e. the "profitability" anomaly. In our model, investors forecast future profits using a signal and sticky belief dynamics. In this model, past profits forecast future returns (the profitability anomaly). Using analyst forecast data, we measure expectation stickiness at the firm level and find strong support for three additional predictions of the model: (1) analysts are on average too pessimistic regarding the future profits of high profit firms, (2) the profitability anomaly is stronger for stocks which are followed by stickier analysts, and (3) it is also stronger for stocks with more persistent profits.

This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is somehow riskier, so that the higher returns of a quality portfolio are a compensation for risk exposure. This view is consistent with the Efficient Market Hypothesis. The other view is the "behavioral view", which states that some investors persistently underestimate the true value of high quality firms. We find no evidence in favor of the "risk view": The returns from investing in quality firms are abnormally high on a risk-adjusted basis, and are not prone to crashes. We provide novel evidence in favor of the "behavioral view": In their forecasts of future prices, and while being overall overoptimistic, analysts systematically underestimate the future return of high quality firms, compared to low quality firms.

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This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is somehow riskier, so that the higher returns of a quality portfolio are a compensation for risk exposure. This view is consistent with the Efficient Market Hypothesis. The other view is the "behavioral view", which states that some investors persistently underestimate the true value of high quality firms. We find no evidence in favor of the "risk view": The returns from investing in quality firms are abnormally high on a risk-adjusted basis, and are not prone to crashes. We provide novel evidence in favor of the "behavioral view": In their forecasts of future prices, and while being overall overoptimistic, analysts systematically underestimate the future return of high quality firms, compared to low quality firms.

Affluent households can respond to taxation with means that are not economically viable for the rest of the population, such as sophisticated tax plans and international tax arbitrage. This article studies an economy in which an inequality-averse social planner faces agents who have access to a tax-avoidance technology with subadditive costs, and who can shape the risk profile of their income as they see fit. Subadditive avoidance costs imply that optimal taxation cannot be progressive at the top. This in turn may trigger excessive risk-taking. When the avoidance technology consists in costly migration between two countries that compete fiscally, we show that an endogenous increase in inequality due to risk-taking makes progressive taxation more fragile, which vindicates in turn risk-taking and can lead to equilibria with regressive tax rates at the top, and high migrations of wealth towards the smaller country.

The French abstract was not provided by the author.

We document investment distortions induced by the use of a single\ud discount rate within firms. According to textbook capital budgeting,\ud firms should value any project using a discount rate determined by the\ud risk characteristics of the project. If they use a unique company-wide\ud discount rate, they overinvest (resp. underinvest) in divisions with a\ud market beta higher (resp. lower) than the firm's core industry beta.\ud We directly test this consequence of the WACC fallacy and establish\ud a robust and significant positive relationship between division-level investment and the spread between the division's market beta and the\ud firm's core industry beta. Consistently with bounded rationality theories, this bias is stronger when the measured cost of taking the wrong discount rate is low, for instance, when the division is small. Finally,we measure the value loss due to the WACC fallacy in the context of acquisitions. Bidder abnormal returns are higher in diversifying mergers and acquisitions in which the bidder's beta exceeds that of the target. On average, the present value loss is about 0.7% of the bidder's market equity.

This thesis focuses on the economics of banking and consists of three chapters. Chapter 1 explores the effects of monetary policy changes on the liability structures of U.S. banks and their funding costs. Banks obtain most of their funding from a combination of demand deposits - which are at zero interest - and interest-bearing deposits. Using local demographic changes as instruments for bank liability structures, I measure the impact of monetary policy changes on each bank's interest-bearing deposit rate as a function of its initial liability structure. I find that when monetary policy tightens, each bank faces an outflow of demand deposits. It responds by issuing interest-bearing deposits, but pays an interest rate that increases with the amount of demand deposits being substituted. This finding confirms the existence of the "bank lending channel" of monetary policy transmission. I also provide evidence that large banks can substitute funding sources at a lower cost than small banks, and that demand deposits are less sensitive to changes in monetary policy when the local banking market is more concentrated. Chapters 2 and 3 focus on mutual banks, which differ primarily from banks under the joint-stock system in their ownership. In the second chapter, Richard Meade and I provide an assessment of the effect of "demutualization" events on depositor welfare. Over the past few decades, many U.S. savings banks have opted to demutualize, converting their ownership from mutual banks to corporations. We first estimate a random parameter logit model of bank deposit choices, using data on commercial banks and savings banks from 1994 to 2005. After recovering depositors' preferences for bank characteristics, we measure the effect of a demutualization of all savings banks on depositors' welfare. We find that, on average, depositor welfare would increase. In particular, if demutualized savings banks offered a deposit rate in line with investor-owned savings banks, each depositor would earn $1.14 per year, for a total of $22 million for each state and year. Our results cast doubt on the ability of U.S. savings banks to serve their customers' interests well, and offer a new explanation for the demutualizations observed in the United States. In the third chapter, Thierry Magnac, Karine Van der Straeten, and I first present evidence that U.S. mutual banks are less risky, lend at lower rates, and have closer ties to their local communities. We propose a model of competition between mutual banks and banks under the corporate regime, adapting the model of Martinez-Miera and Repullo (RFS, 2010). We assume that the difference between the two types of banks is that mutual banks, given their stronger local reach, impose a greater "social cost" on failed policyholders. We simulate the model and evaluate the effect of competition on the probability of failure in both types of banks. Our results indicate that, consistent with the empirical evidence presented, mutual banks lend at lower rates and have a lower probability of default at any level of competition. Moreover, similar to what happens to banks under the joint stock regime, their probability of default is U-shaped in the level of competition.

Agents choose to acquire skills ranging from simple and transparent tasks to complex and opaque ones. While potentially more productive, the latter generate more severe agency problems. In our overlapping generations model, agents compete with their predecessors. With dynamic contracts, long horizons help principals incentivize agents. Agents with short horizons are more difficult to incentivize than agents with long horizons. Hence, old agents are imperfect substitutes for young ones. This reduces competition between generations. As a result, young managers can opt for more opaque and complex technologies, and therefore larger rents, than their predecessors. Thus, in equilibrium, complexity and rents rise over time. Our theoretical results are in line with the increase in complexity and rents observed in the finance sector.

In its first part, this thesis studies the optimal use of derivatives by financial intermediaries in their risk management, with specific attention to the interest rate derivatives market. By modeling the optimal capital structure of a bank, the first chapter shows how the optimal use of derivatives affects some decisions often studied in corporate finance: credit supply, maturity transformation, dividend policy or default probabilities. The second part of the thesis studies the derivatives market as a system in its own right. The second chapter uses a new and unique database of bilateral exposures on CDS contracts to provide a detailed description of the structure of the exposure network. The third chapter focuses on the regulation of derivatives markets. It studies the central clearing of standardized derivatives, and the demand for collateral induced by this reform on a global scale, under a variety of assumptions about market microstructure.

Due to non-linear transaction costs, the financial performance of a trading strategy decreases with portfolio size. Using a dynamic trading model a la Garleanu and Pedersen (2013), the authors derive closed-form formulas for the performance-to-scale frontier reached by a trader endowed with a signal predicting stock returns. The decay with scale of the realized Sharpe ratio is slower for strategies that (1) trade more liquid stocks (2) are based on signals that do not fade away quickly and (3) have strong frictionless performance. For an investor ready to accept a Sharpe reduction by 30%, portfolio scale (measured in dollar volatility) is given by a simple formula that is a function of the frictionless Sharpe, a measure of price impact, and a measure of the speed at which the signal fades away. They apply the framework to four well-known strategies. Because stocks have become more liquid, the capacity of strategies has increased in the 2000s compared to the 1990s. Due to high signal persistence, the capacity of a "quality" strategy is an order of magnitude larger than the others and is the only one highly scalable in the mid-cap range.

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Due to non-linear transaction costs, the financial performance of a trading strategy decreases with portfolio size. Using a dynamic trading model a la Garleanu and Pedersen (2013), we derive closed-form formulas for the performance-to-scale frontier reached by competitive traders endowed with a signal predicting stock returns. The decay with scale of the realized Sharpe ratio is slower for strategies that (1) trade more liquid stocks (2) are based on signals that do not fade away quickly and (3) have strong frictionless performance. We apply the framework to four well-known strategies. The capacity of strategies has increased in the 2000s compared to the 1990s due to increased liquidity. Because low volatility and past accounting profitability are persistent characteristics, strategies based on them are highly scalable, including in the mid-cap range. When traders underestimate the number of competitors trading a similar signal, their performance is strongly negatively impacted.

"To save jobs, we need to save industry", "It's up to the State to get us out of the slump and preserve growth", "The markets are the dictatorship of the short term", "The solution to the crisis is more Europe!" - these are all tough clichés that rot the public debate in France, maintain the ambient gloom and end up sinking the country. Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing the lobbies that sustain them and addressing a number of very concrete questions: Why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money?]

The authors study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is still formally a stationary solution of the dynamics, the authors show that this equilibrium becomes linearly unstable in a whole region of parameter space. When agents attempt to reach the optimal production target too quickly, coordination breaks down and the dynamics becomes chaotic. In the unstable, "turbulent", phase the aggregate volatility of the total output remains substantial even when the amplitude of idiosyncratic shocks goes to zero or when the size of the economy becomes large. In other words, crises become endogenous. This suggests an interesting resolution of the "small shocks, large business cycles" puzzle.

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In the `size of stakes' view quantitatively formalised in Gabaix and Landier (2008), CEO\ud compensation reflects the size of rms aected by talent in a competitive market. The years\ud 2004-2011 were not part of the initial study and oer a laboratory to examine the theory\ud with new positive and negative shocks. Executive compensation (measured ex ante) did closely track the evolution of average firm value, supporting the `size of stakes' view out of\ud sample. During 2007 - 2009, rm value decreased by 17%, and CEO pay by 28%. During\ud 2009-2011, firm value increased by 19% and CEO pay by 22%.

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We show empirically that banks' exposure to interest rate risk, or income gap, plays a crucial role in monetary policy transmission. In a first step, we show that banks typically retain a large exposure to interest rates that can be predicted with income gap. Secondly, we show that income gap also predicts the sensitivity of bank lending to interest rates. Quantitatively, a 100 basis point increase in the Fed funds rate leads a bank at the 75th percentile of the income gap distribution to increase lending by about 1.6 percentage points annually relative to a bank at the 25th percentile.

Fundamental and lively, this B.A. BA offers you the keys to a better understanding of our world and the challenges of contemporary economics. In six major chapters, it offers the basics to understand our current economic situation: What is a market? How does the State intervene? How does the business world work? What is globalization? Six leaflets summarizing these major concepts accompany the texts written by specialists in these questions. The book accompanies the exhibition "THE ECONOMY: KRACH, BOOM, MUE?" at the Cité des sciences et de l'industrie from March 26, 2013.

A book, conceived in the form of interviews, which presents different notions of the economy such as: the market and the State, growth, work and the company, exchange and globalization, and the major currents of economic thought. Six very visual folders and numerous illustrations and graphics accompany the text. This book is intended for novices and high school students.

"To save jobs, we must save industry", "It's up to the State to get us out of the slump and preserve growth", "The markets are the dictatorship of the short term", "The solution to the crisis is more Europe!" - these are all tough clichés that rot the public debate in France, maintain the ambient gloom and end up sinking the country. Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing the lobbies that sustain them and addressing a number of very concrete questions: Why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money? Augustin Landier and David Thesmar decipher these obvious and harmful myths with a sharp pen, denouncing at the same time the lobbies that maintain them and addressing a number of very concrete questions: why are we afraid of robotization? What is the purpose of an engineer in the digital age? Why are our SMEs struggling to find money?]

The correlation across US states in house price growth increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and document that house price growth correlation is strongly related to this measure of financial integration. Our IV estimates suggest that banking integration can explain up to one fourth of the rise in house price correlation over this period.

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This thesis consists of four separate chapters. In the first chapter, I use an exogenous restriction on the ability of road haulage firms to grant payment terms to their customers. I show that some firms lend to their customers at the expense of their investments, their profitability and by exposing themselves to the risk of default. In the second chapter, I show that investment funds with a long time horizon choose younger firms at a less advanced stage of development. Firms invested by funds with a longer time horizon increase their patent stock faster than those invested by funds with a shorter time horizon. The third chapter is the result of a collaboration with Ron Kaniel and David Sraer. We use detailed broker data and undertake a quantitative exploration of individual investor behavior during the 2008 financial crisis. We show that investors who look the most sophisticated in the pre-crisis period have a lower propensity to flee to risk-free assets, and a higher propensity to be liquidity providers and earn high returns during the crisis. In the fourth chapter, I explore the idea that households have limited knowledge of their portfolio's exposure to systematic risk factors, which leads them to make mistakes. This idea is applied to individual investors' decision to actively rather than passively invest in equity markets.

This thesis analyzes three types of inefficiencies in the finance sector. The first concerns the labor market. Wages in finance are high relative to other sectors of the economy. I develop a theoretical model that shows that, in a sector where profits are very sensitive to talent, this wage surplus may be the result of inefficiencies in the recruitment and selection of talent. The exploitation of data from a survey on engineers' salaries in France confirms the empirical predictions of the model: the variance of salaries in the finance sector is high, and above all, the salary surplus is largely explained by size effects. The second paper of the thesis analyzes the debt structure of small firms in a context of non-exclusive competition. Loans are offered simultaneously by lending institutions, the firm may accept one or more of them, and these institutions do not observe the set of loans chosen by the firm. Two types of institutions are in competition: the banks that "control" the firm, for example by guiding it in its investment decisions, and the more informal institutions that have no access to information or means of control. The "control" exercised by the banks makes it possible to reduce the problems of moral hazard, but at a cost that can be prohibitive. For example, I find that smaller firms do not have access to bank loans and are only offered loans from informal institutions. The share of debt financed by banks increases as the size of the firm increases, while interest rates, and the profits of lending institutions decrease. The third paper of the thesis shows how financial innovation by increasing product complexity can be a way to reduce competition and exploit the low financial sophistication of retail investors. Using a database of all structured products marketed in Europe since 1996, we construct three measures of product complexity. Each of these measures shows the dramatic increase in complexity in this market. This complexity is higher when competition is more intense, decreases when the target investor has a more developed financial education and corresponds to a structuring strategy at lower cost for the bank.