Anusha Chari

Contact Information:

301 Gardner Hall
CB #3305 Department of Economics 
University of North Carolina at Chapel Hill
Chapel Hill, NC  27599
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. She is also a Faculty Research Fellow in the National Bureau of Economic Research’s International Finance and Macroeconomics Program.

Publications

"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.

"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.

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.

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.

"The Value of Control in Emerging Markets" Forthcoming Review of Financial Studies, (with Paige Ouimet and Linda Tesar).

When a developed-country multinational firm acquires majority control of a firm in an emerging market, there is an economically large and statistically significant increase in the acquiring firms' stock price. Between 1986-2006 developed-market acquirers experience positive and significant abnormal returns of 1.16%, on average, over a three-day event window. Positive acquirer returns and dollar value gains appear unique to emerging-market M&A and are not replicated when the same developed-market acquirers take over firms in developed markets. The size of the stock price increase is more pronounced: (a) the weaker the contracting environment in the emerging market and (b) for industries with high asset intangibility.

Published Comments

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.

Working Papers

"Foreign Ownership and Firm Performance: Emerging-Market Acquisitions in the United States" NBER Working Paper No. 14786. (with Wenjie Chen and Kathryn Dominguez) Read about this paper in the NBER Digest, June 2009.

This paper examines the recent upsurge in foreign acquisitions of U.S. firms, specifically focusing on acquisitions made by firms located in emerging markets. Neoclassical theory predicts that, on net, capital should flow from countries that are capital-abundant to countries that are capital-scarce. Yet increasingly emerging market firms are acquiring assets in developed countries. Using transaction-specific acquisition data and firm-level accounting data we evaluate the post-acquisition performance of publicly traded U.S. firms that have been acquired by firms from emerging markets over the period 1980-2007. Our empirical methodology uses a difference-in-differences approach combined with propensity score matching to create an appropriate control group of non-acquired firms. The results suggest that emerging country acquirers tend to choose U.S. targets that are larger in size (measured as sales, total assets and employment), relative to matched non-acquired U.S. firms before the acquisition year. In the years following the acquisition, sales and employment decline while profitability rises suggesting significant restructuring of the target firms.