Contact Information:
301 Gardner Hall
CB #3305
Department of Economics
University of North Carolina at Chapel Hill
Chapel Hill, NC 27596
Office Phone: (919)966-5346
achari@email.unc.edu
Anusha Chari's research focuses on international finance with an emphasis on the study of emerging financial markets. Her academic and professional pursuits reflect an interest in synthesizing theory and data to find answers to real world problems. Her recent work on stock market liberalization uncovers new stylized facts about the interaction of real and financial markets using firm-level data. These facts complement a growing body of literature that documents the importance of financial development for economic growth. Her current research includes a study of cross border mergers and acquisitions in Latin America and East Asia. Her earlier work examined the effects of central bank interventions using tick-by-tick data in the foreign exchange market.
Anusha received a PhD in International Finance from The Anderson School at UCLA and an undergraduate degree in Philosophy, Politics and Economics from Balliol College at Oxford University. In addition to teaching at the University of North Carolina, she has taught both international and finance courses at the The University of Michigan, University of Chicago's Graduate School of Business and The Haas School of Business at Berkeley
"Heterogeneous Market-Making in Foreign Exchange Markets: Evidence from Individual Bank Responses to Central Bank Interventions." Journal of Money, Credit and Banking, Vol. 39, No.5, pp. 1131-1161, 2007. Appendix 1 , Appendix 2
Using high-frequency data this paper finds strong evidence that, on average, central bank interventions lead to increased volatility and a widening of bid-ask spreads in the intra-day market for foreign exchange. The results also show that there is dispersion in the bid-ask spread revisions posted by individual banks in response to the central bank entering the market. The findings are consistent with predictions from standard models of market microstructure with heterogeneous agents and have implications for the market power of central banks as well as the payoff generated by trading large amounts of international reserves.
"Incumbents and Protectionism: The Political Economy of Foreign Entry Liberalization." Journal of Financial Economics, Vol. 88, No. 3, pp. 633-656, 2008 (with Nandini Gupta).
This paper investigates the influence of incumbent firms on the decision to allow foreign direct investment into an industry. Based on data from India's economic reforms, the results suggest that firms in concentrated industries are more successful at preventing foreign entry, that state-owned firms are more successful at stopping foreign entry than similarly placed private firms, and that profitable state-owned firms are more successful at stopping foreign entry than unprofitable state-owned firms. These findings continue to hold after controlling for industry characteristics such as the presence of natural monopolies and the size of the workforce. The pattern of foreign entry liberalization supports the private interest view of policy implementation.
"Firm Specific Information and the Efficiency of Investment." Journal of Financial Economics, Vol. 87, No. 3, pp. 636-655, 2008 (with Peter Blair Henry).
In the three-year period following stock market liberalizations, the growth rate of the typical firm's capital stock exceeds its pre-liberalization mean by an average of 4.1 percentage points. Cross-sectional changes in investment are significantly correlated with the signals about fundamentals embedded in the stock price changes that occur upon liberalization. Panel data estimations show that a 10-percentage point increase in a firm's expected future sales growth predicts a 2.9- to 3.5-percentage point increase in the growth rate of its capital stock, depending on the specification; country-specific changes in the cost of capital are also important, generating an economically and statistically significant change in capital stock growth in almost every specification; firm-specific changes in risk premia do not affect investment.
"Risk Sharing and Asset Prices: Evidence from a Natural Experiment." Journal of Finance, Vol. 59, No. 3, pp. 1295-1324 (with Peter Blair Henry). Nominated for Smith Breeden prize for the best paper published in the Journal of Finance, 2004.
When countries liberalize their stock markets, firms that become eligible for foreign purchase (investible), experience an average stock price revaluation of 15.1 percent. Since the historical covariance of the average investible firm's stock return with the local market is roughly 200 times larger than its historical covariance with the world market, liberalization reduces the systematic risk associated with holding investible securities. Consistent with this fact: (1) the average effect of the reduction in systematic risk is 6.8 percentage points, or roughly two fifths of the total revaluation; and (2) the firm-specific revaluations are directly proportional to the firm-specific changes in systematic risk.
Book Review of "Boom Bust Cycles and Financial Liberalization" Journal of Economic Literature, Vol. 45, No. 4, pp. 1024-1093, 2007.
Comments on "Capital Flows and Exchange Rate Volatility: Singapore's Experience," in NBER Volume "International Borrowing, Capital Flows and Capital Controls in Emerging Economies: Policies, Practices and Consequences," Sebastian Edwards ed., University of Chicago Press, 2007.
"The Value of Control in Emerging Markets" with Paige Ouimet and Linda Tesar. This is the most recent version of "Acquiring Control in Emerging Markets: Evidence from the Stock Market," NBER Working paper No. 10872. Revise and Resubmit Review of Financial Studies.
This paper examines shareholder value gains from developed-market acquisitions of emerging-market targets. On average over the 1988-2003 period, abnormal returns for developed-market acquirers show an anomalous increase of 1.18% over a three-week event window when M&A transactions in emerging markets are announced. For a sample of 390 transactions, market-adjusted returns translate to an aggregate dollar value gain of $111.5 billion for shareholders of acquiring firms. Acquirer returns triple to 4.43% when majority control of the target is acquired. Surprisingly, the median net return (acquirer's dollar value gain/transaction value) is 1.37 with the acquisition of control. We offer a possible explanation for these puzzling findings: the data suggest that improved governance (via control rights) and the transfer of intangibles such as R&D or brand value from acquirers to targets explain the revaluation in acquirer stock prices and the resulting dollar value gains in emerging market transactions.
