Raymond Kim, Ph.D.

Working Papers:

The Paradox of Record Cash and Record Debt: The Cash-Collateral Channel
Revise & Resubmit, Journal of Financial and Quantitative Analysis

Abstract: Firms hold cash not to avoid debt, but to expand their capacity to borrow. The paradox of record corporate cash and debt contradicts traditional theories that firms use excess cash to deleverage. I identify the cash-collateral channel through quasi-experimental variation in both federal and state corporate taxes, interacted respectively with firm-level profitability and S\&P credit ratings, with placebo tests ruling out macroeconomic confounds. Syndicated loan pricing from DealScan confirms the channel in the lending market: cash reduces spreads, with the effect strengthening at longer maturities---a pattern consistent with collateral and inconsistent with refinancing risk. Cash expands borrowing capacity for larger firms approaching debt capacity, while smaller firms under severe distress use cash to pay down debt. The channel extends to non-debt liabilities, operates countercyclically, and funds shareholder payouts rather than investment.

Risk Aversion, Taxes and Capital Structure Adjustments (with Jean Helwege and Othman Alolah)

Under Revision for Resubmission, Review of Corporate Finance Studies

A Roadmap to Profitable Sustainability: Dual Constraints in Venture Capital (with Othman Alolah)

Abstract: This paper provides the first evidence that the negative relationship between sustainability and financial performance predicted by equilibrium asset pricing models can be reversed, and identifies the governance conditions required to achieve it. Using hand-collected venture data matched with RepRisk ratings, we document a ``Dual Reversal'': the unconditional negative association between ESG and exit outcomes inverts under joint oversight by Corporate Venture Capital (CVC) and Independent Venture Capital (IVC), on both the probability of exit and exit valuation. Strategic alignment between CVC parents and startups drives this reversal, with capital efficiency operating as a force multiplier on invested capital. Two quasi-natural experiments---the Facebook--Cambridge Analytica data scandal and the Turing Pharmaceuticals drug pricing scandal---confirm that CVC governance activates domain-specific ESG improvements along the dimensions most relevant to each shock. These findings offer a roadmap to sustainable profitability under dual constraints.

Industry Tournament Incentives and Corporate Venture Capital (with Othman Alolah and Fatima Shuwaikh)

Abstract: We examine whether competition among industry CEOs over higher pay drives corporate innovation. Using an instrumental variable approach, results suggest industry tournament incentives (ITI) increase corporate venture capital (CVC) investments. While these investments do not increase patent quantity, they are associated with higher-quality innovation and, where tournament incentives are strongest, with greater long-term firm value. Additionally, we employ a staggered difference-in-differences approach, leveraging the rejection of the Inevitable Disclosure Doctrine (IDD) in U.S. states as an exogenous shock to CEO job mobility. Increased CEO outside opportunities reduce the likelihood of venture investments, suggesting that a shorter expected horizon weakens CEOs' incentives to initiate programs whose payoffs accrue slowly.

Published Papers:

Better than Risk-Free: Reserve Premiums and Bank Lending

The Financial Review, 2025

Abstract: When the Federal Reserve first paid interest on excess reserves (IOER) in October 2008, banks faced a choice to earn a “better than” risk-free rate, or lend to earn a higher, riskier rate. Evidence suggests the “reserves-lending puzzle” is not driven by endogeneity from reverse causality, flight to safety, or increased Treasury supply, but by the introduction of the “reserve premium” (IOER-3MT), which is associated with a reduction of domestic bank-level lending by -5.1% (-$420.2B). Findings suggest the reserves risk channel can aid in restricting inflation. Additionally, recent Senior Financial Officer Surveys corroborate the conclusions presented in this paper.

How Do Community Banks Access Liquidity During Funding Stress Events? (with Patrick Herb)

Finance Research Letters, 2025

Abstract: We examine how community banks access liquidity during funding stress events. We find a liquidity facility utilization pecking order, in which Federal Home Loan Bank (FHLB) advances are the most utilized liquidity facility, followed by the federal funds market, followed by repurchase agreements. We also find that balance sheet liquidity affects the utilization of liquidity facilities. During funding stress events, banks that have relatively more liquid balance sheets increase their utilization of repurchase agreements and federal funds, and decrease their utilization of FHLB advances, while banks with relatively more illiquid balance sheets increase their utilization of FHLB advances, and decrease their utilization of repurchase agreements and federal funds. Our findings suggest that the FHLB is fulfilling its mission to provide liquidity to its members and support housing finance, and may be the preferred lender of last resort for community banks.

Hedging Securities and Silicon Valley Bank Idiosyncrasies

Journal of Futures Markets, 2024

Abstract: Hedging requires adequacy and timing. This paper finds that banks did not systematically ignore balance sheet risks like Silicon Valley Bank, and instead exercised risk management by asymmetrically increasing hedging activity when security losses increase and scaling back hedging activity as security losses reverse. Banks also hedge against bank runs when risk increases due to a combination of security losses and funding risks from unsecured deposits. Findings suggest Silicon Valley Bank’s mistakes are idiosyncratic. Results suggest that non-stress test banks target balance-sheet risks when hedging, stabilizing themselves from interest rate shocks transmitted through fixed-income securities. Scrutiny of rules-based outliers like SVB is preferable to increased regulatory burden for all non-stress test banks.

Disproportionate Costs of Uncertainty: Small Bank Hedging and Dodd-Frank

Journal of Futures Markets, 2021

Abstract: Uncertainty in banking regulation may impose widespread economic costs by increasing financial constraints on credit availability. Four years of Dodd‐Frank uncertainty over undecided risk weightings increased regulatory uncertainty for smaller banks, restricting “vanilla” interest rate hedging activities. This paper uses newly reported mortgage banking data as an identification strategy and finds that when costs of uncertainty are removed, small banks hedge 97%–120% more interest rate risk while mortgage securitization income increases by 65.2% compared to large banks. These findings support the need for tailored regulations that consider the higher costs of regulatory uncertainty for smaller banks.

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