Juan Imbet | Assistant Professor of Finance

Working Papers

Social Media as a Bank Run Catalyst

R&R at the Journal of Financial Economics

J. Anthony Cookson, Corbin Fox, Javier Gil-Bazo, Juan Felipe Imbet, Christoph Schiller

Abstract: After the run on Silicon Valley Bank (SVB), U.S. regional banks entered a period of significant distress. We quantify social media's role in this distress using comprehensive Twitter data. During the SVB run period, banks with high pre-existing exposure to Twitter lost 4.3 percentage points more stock market value. Moreover, Twitter pre-exposure interacts significantly with classical run risks to predict greater run severity and greater deposit outflows during Q1 2023, effects unexplained by other banking or market characteristics. At the hourly frequency during the run, high Twitter attention over the past four hours predicts stock market losses, especially for banks with high run risks. By contrast, we find that negative Twitter sentiment does not amplify bank run risks. Rather, our evidence points to a distinctive role of Twitter attention by tech community members who are likely depositors in SVB, as well as tweets that mention running and contagion.

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Tweeting for Money: Social Media and Mutual Fund Flows

Javier Gil-Bazo, Juan Felipe Imbet

Abstract: We unveil asset managers’ social media communications as a distinct new channel for attracting flows of money to mutual funds. Combining a database of more than 1.6 million posts on X/Twitter by U.S. mutual fund families with textual analysis, we find that flows of money to mutual funds respond positively to both the number and tone of the posts. The link between social media communications and flows of money is not explained by marketing efforts, but the two strategies reinforce each other. A high-frequency analysis that exploits intraday ETF trade data allows us to isolate the effect of tweets on investor decisions from potential confounders. We then consider and test four different economic mechanisms. The results of these tests do not support the hypothesis that asset managers’ social media communications reduce search costs for potential investors. The results do not support, either, that asset management companies’ Twitter activity increases investor attention or alleviates information asymmetries by communicating performance-relevant information to investors. In contrast, our evidence suggests that asset managers use social media as an effective persuasion tool.

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The Real Effects of Offshore Data Leaks: Evidence from Private Firms

Marcelo Ortiz M., Juan Felipe Imbet

Abstract: This study investigates the real effects of major offshore data leaks on private firms. By matching leaked data with firm-level information, we identify a large sample of small private firms involved in offshore activities in tax havens and analyze their corporate policies. Employing the sequence of leaks in a staggered difference-in-difference design, we observe that exposed firms invest more in fixed assets and labor pre-leaks but then significantly decrease their investments after the leaks. Our cross-sectional analyses show that unproductive firms and firms with faster deduction of investment expenditures benefit the most from offshore tax evasion before the leaks. The leaks also reduced corporate taxation, an effect that is not driven by fewer sales. Overall, our results suggest that offshore tax evasion boosts domestic investment among less productive firms, an effect that is muted or even reversed after the leaks.

Dynamic Contracting and Corporate Tax Strategies

Juan Felipe Imbet, Marcelo Ortiz M., Vincent Tena

Abstract: We use a dynamic moral hazard model in which a firm's owner delegates the corporate tax strategy to an agent in an institutional setting with random inspections by tax officers. The principal cannot observe the underlying gross profits or the agent's efforts to reduce tax expenses. The inspection is random and may not occur. Upon inspection, illegal strategies are detected and penalized, however, the authorities cannot observe how much was evaded. The optimal dynamic contract consists of a terminal compensation and a tax reduction strategy. We find that even in contexts without inspections, a risk-averse owner will not contract tax strategies if the agent's effort costs or the gross profit volatility are too high to compensate for risk aversion. For contexts with inspections, the optimal compensation includes an additional risk premium for bearing the inspection risk and a lump-sum loss contingent on an inspection. The optimal tax strategy becomes less aggressive over time as the expected penalty increases. The dynamic nature of the model allows for quantitative evaluations. Using calibrated parameters from corporate taxation in the U.S., the model indicates that the agent's compensation corresponds to 37.8% of the expected benefits derived from the tax strategy.

The Forecasting Power of Short-term Options

Arthur Böök, Juan Felipe Imbet, Martin Reinke, Carlo Sala

Abstract: We propose robust option-implied measures of conditional volatility, skewness and kurtosis based upon quantiles and expectiles inferred from weekly options on the S&P 500. All quantities are by construction forward-looking and estimated non-parametrically through a novel robust and arbitrage-free natural smoothing spline technique that produces quick to estimate volatility smiles. We find that the option-implied robust indicators exhibit short-, medium- and long-term predictive ability for the U.S. equity risk premium, market volatility, skewness and kurtosis, both in- and out-of-sample, and outperform equal indicators inferred from historical returns.

Stroke of a Pen: Investment and Stock Returns under Energy Policy Uncertainty

Juan Felipe Imbet

Abstract: Energy policy uncertainty - as measured by uncertainty about a U.S. President signing an energy related executive order in the future - covaries positively with corporate investment and aggregate consumption growth, and its innovations carry a negative price of risk. I propose and test a q-theory explanation in which firms invest in energy-efficient capital when facing energy policy uncertainty. This uncertainty amplifies differences in investment between growth and value companies as the benefits of substituting energy for capital increase with growth opportunities. As the benefits to invest increase, aggregate current consumption decreases relative to future consumption, creating time varying expected variation in aggregate market returns and consumption growth. Without an investment factor, uncertainty betas explain cross-sectional variation in stock returns across portfolios that differ in their growth opportunities. However, since investment reacts to uncertainty endogenously, an asset pricing model that accounts for an investment factor absorbs the cross-sectional differences in expected returns explained by this policy uncertainty. My findings suggest that uncertainty about future energy policies in the last four decades can explain firms' adoption of energy-efficient capital.

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