Rebecca De Simone

I am an Assistant Professor with the Finance Department at the Stephen M. Ross School of Business, University of Michigan.

I am also a Research Affiliate for the Banking and Corporate Finance Programme at the Centre for Economic Policy Research.

I completed a Ph.D. and M.Phil. in Finance at Columbia Business School and a BA in Economics and minors in Mathematics and Classics Studies at the University of Florida.

Email: rdsimone@umich.edu

Office Phone: 734-763-6022

Address: 701 Tappan Street, R5446, Ann Arbor, MI 48109

Ross Webpage

Curriculum Vitae

Working Papers

Public Monitoring, Private Lending: Evidence From Tax Audit Reform in Ecuador. (Revise and Resubmit at The Review of Financial Studies)

I use an Ecuadorian reform to show that ﬁrm monitoring by tax authorities increases ﬁrm transparency, improves ﬁrm ﬁnancial access, and impacts employment and investment. Using a regression discontinuity design, I ﬁnd that borrowing costs decrease by 18.9% while borrowing increases by 23.1% for highly scrutinized ﬁrms. Moreover, treated ﬁrms report approximately 20% higher investment and employment. The eﬀect is strongest for the ﬁrms with a higher evasion risk and where private contracts are costlier to enforce. This indicates that the eﬀect of tax monitoring works primarily through reducing fraudulent ﬁnancial statements and ﬁrm cash ﬂow diversion.

Taxation when markets are not competitive: Evidence from a loan tax. With Felipe Brugués. (Revise and Resubmit at The Journal of Political Economy)

We examine how market structure impacts the effectiveness of financial taxes and subsidies using pass-through estimates from Ecuador’s unexpected introduction of a loan tax in 2014. Utilizing a comprehensive commercial loan dataset and a quantitative model that generalizes bank competition theories—including Bertrand-Nash competition, credit rationing, and joint maximization—we reject standard competition models and find that distortions from the loan tax depend significantly on market competitiveness. Ignoring market structure inflates estimated deadweight loss by 80\% because non-competitive banks absorb some tax burden. Conversely, subsidies are less effective in less competitive markets. Findings suggest policymakers consider market structure in tax-and-subsidy strategies.

Opening the Brown Box: Production Responses to Environmental Regulation. With S. Lakshmi Naaraayanan and Kunal Sachdeva.

We study the production responses of manufacturers to an emission capping regulation. Firms lower emissions by improving energy efficiency, substituting towards cleaner fuels, and moving from producing electricity to purchasing it from the grid. They move away from coal-intensive products and increase their abatement expenditures. These changes improve firm productivity, supporting theories that regulation prompts technology adoption. In the aggregate, we document lower product variety and an altered firm-size distribution, driven by a reduced likelihood of business formation. Our findings highlight how mandated pollution reduction can be effective and the costs it imposes, suggesting a loss of agglomeration externalities.

How do banks compete? Lessons from an Ecuadorian loan tax. With Felipe Brugués.

We study how bank competition affects commercial lending, extending the findings in Brugués and De Simone (2024). We find that 26% of observed markups are due to joint profit maximization. Moving to Bertrand-Nash would reduce equilibrium prices by 17%, increase loan use by 21% (intensive margin), and increase overall credit demand by 13% (extensive margin). These distortions vary greatly by borrower characteristics and dwarf those of financial transaction taxes. Through partial equilibrium instrumental variable regressions, we find large effects on firm size and productivity. We aggregate this partial equilibrium effect through a general equilibrium model of firm dynamics to measure the dynamic effects of credit and firm growth. Overall, our findings suggest that the lack of competition in banking has first-order implications for credit and misallocation.

Macrostructure Reform in an Inelastic Market: Evidence from Adoption of ETF Creation in Israel. With Polina Dovman, Ilan Gildin and Gitit Gur Gershgoren.

We study a 2012 reform in Israel where all exchange-traded products listed on the Tel Aviv Stock Exchange (TASE) adopted the Exchange Traded Fund (ETF) creation mechanism wherein designated market makers arbitrage between the index price and the net asset value of its benchmark. The reform greatly decreased the cost of this arbitrage activity and improved the liquidity of the ETP. We document that, in response, there was a significant increase in demand for ETP. Next, we find that the effect was stronger for illiquid indices containing smaller stocks. We utilize this heterogeneity to estimate the causal effect of inflows into the ETP on the price of the benchmark securities. A 1 p.p. increase in ETP ownership as a percent of market capitalization leads to an 11.7% increase in the price of stocks, revealing highly inelastic demand for equities. Our findings provide new evidence on how passive inflows can change the distribution of capital across indices and, in turn, impact price and real efficiency.

Selected Work in Progress

Delegated screening: Evidence from government-backed loans. With Felipe Brugués, Thi Mai Anh Nguyen, and Juan Vélez-Velásquez.

Collateral, enforcement, and credit expansion. With Felipe Brugués, Thi Mai Anh Nguyen, and Juan Vélez-Velásquez.

Equilibrium effects of quality disclosure in higher education. With Felipe Brugués and Sebastián Otero.

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