Mostafa Aghasian, PhD

Researcher in Finance

PSL Research University

Main Research Interests:

Financial Intermediation

Private Credit 

Corporate Governance

Securities Market


Banks’ Private Money Creation and Market Preferences: Evidence from Banks’ Commercial Paper Issuance, SSRN Version 

Unsecured short-term creditors of banks face the write-off risk of their securities in the event of bank runs. To prevent frequent failures, banks are required to maintain a certain level of equity within their capital structure. Thus, the short-term investors expect the disclosed equity to serve as a protective buffer providing insurance. However, an agency problem arises when banks utilize the proceeds from short-term securities issuance to artificially smooth their reported equity levels. In this study, we propose an empirical framework to observe this issue and we discover that money market funds (MMFs) act as monitors when purchasing banks' commercial papers in the primary market. Our findings illustrate that when MMFs invest in banks' short-term debts, they prefer those banks that keep their short-term debt independent from equity fluctuations, i.e., separate their liquidity management from asset-liability management. We evaluate these market preferences by observing that the banks are divided into two groups during the MMFs’ regulatory reforms that led to a decline in their demand for banks' commercial papers. Additionally, we observe that banks facing restrictions in the short-term debt market to regain market confidence signal the quality of their balance sheets through discretionary capital management. Lastly, we explore the persistence of MMFs' preferences during the Covid-19 pandemic and find that the banks' cross sectional assignment during the regulatory reforms positively predict their placement during Covid-19.


The 2023 Sydney Banking and Financial Stability Conference, AFSE-Sciences Po: 71st Congress of the French Economic Association, AFFI-KEDGE: 39th Conference of the French Finance Association, Institut Louis Bachelier:16th Financial Risks International Forum   

Is Trade Credit Insurance of Equal Importance to All Firms? SSRN Version 

To what extent does the reduction of financial risk management instruments in the market impact firms' economic decisions? In this study, we examine the influence of changes in the availability of trade credit insurance services on firms' trade credit provision, using a large sample of firms across 19 countries in the Euro Area. By using the mandatory implementation of Solvency II regulations as an exogenous event affecting insurance companies' underwriting activities, we uncover a detrimental effect of this shock on firms' real economic decisions, specifically in terms of trade credit provision. The introduction of precautionary regulations restricts risk-taking by trade credit insurance underwriters, thereby impacting trade credit operations in countries with higher reliance on insurance services. Notably, these findings are more pronounced for firms in industries that more heavily depend on insurance services, possess larger market presence within their respective industries, and display stronger correlation with their industry's trend of insurance service dependence. Furthermore, our analysis reveals a relationship between reduced trade credit insurance activities and the firms' sales growth, following similar patterns.


The 2022 FMA Annual Meeting, The 2022 NFA Conference, AFSE-Dijon: 70th Congress of the French Economic Association, AFFI-Rennes: 38th International Conference of the French Finance Association, The 11th International Conference of the Financial Engineering and Banking Society  

Trade Credit Provision and Strategic Use of Captive Finance Subsidiaries, SSRN Version 

Captive finances are financial arms of large manufacturing and retailing firms, aiding their parents' sales by providing long-term loans to customers. However, a significant portion of their lending activities is directed towards independent vendors who operate under franchise agreements with the parent firms. In this study, we construct a comprehensive sample of firms with captive finance arms, allowing for a simultaneous examination of trade credit and bank credit provision by both parent firms and their subsidiaries. This unique framework in the credit literature enables us to investigate the impact of long-term credit monitoring by captive subsidiaries on the parent's short-term credit provision for almost homogeneous collaterals. Our results indicate that parent firms strategically employ trade credit provision as a means to leverage the vendors' network, extending greater short-term trade credit to vendors demonstrating superior long-term loan performance. Furthermore, we assess various factors related to captive finance subsidiaries, including their size, lending activity, and loan portfolio risk parameters. The findings demonstrate a positive relationship between the size and activity of captive finance subsidiaries and the trade credit provision of parent companies. Additionally, a strong correlation is observed between the favorable performance of captive finance loans and the extent of trade credit provision.

Uncharted Rights, Trade Execution, and Firm Boundaries: Delegating Quantum Computing, (with Tanaz Moradi) SSRN Version 

We consider a dynamic model for the delegation of uncharted rights to private firms in which the agents produce homogenous goods and trade them in an exogenous market. The agents have homogenous production technology, there are no transfers, and the principal rearranges rights at no cost, the only distinction point is the utilization of a trading technology to execute trades optimally in the exogenous market. We apply our setting to revisit the theory of public and private partnership and the firm boundaries when the goal is to maximize the rights’ value in interaction with the exogenous market. We augment the basic model with information asymmetry and moral hazards and propose reference points to the residual rights as a potential method to control these agency problems.