Faculty & Research

Amir Sufi

Chicago Board of Trade Professor of Finance

Phone :
1-773-702-6148
Address :
5807 South Woodlawn Avenue
Chicago, IL 60637

Amir Sufi is the Chicago Board of Trade Professor of Finance at the University of Chicago Booth School of Business. He is also a Research Associate at the National Bureau of Economic Research. He serves as an associate editor for the American Economic Review and the Quarterly Journal of Economics.

Professor Sufi's research focuses on finance and macroeconomics. He has articles published in the American Economic Review, the Journal of Finance, and the Quarterly Journal of Economics. His recent research on household debt and the economy has been profiled in the Economist, the Financial Times, the New York Times, and the Wall Street Journal. It has also been presented to policy-makers at the Federal Reserve, the Senate Committee on Banking, Housing, & Urban Affairs, and the White House Council of Economic Advisors. This research forms the basis of his book co-authored with Atif Mian: House of Debt: How They (and You) Caused the Great Recession and How We Can Prevent It from Happening Again, which was published by the University of Chicago Press in 2014.

Sufi graduated Phi Beta Kappa with honors from the Walsh School of Foreign Service at Georgetown University with a bachelor's degree in economics. He earned a PhD in economics from the Massachusetts Institute of Technology, where he was awarded the Solow Endowment Prize for Graduate Student Excellence in Teaching and Research. He joined the Chicago Booth faculty in 2005.

 

2013 - 2014 Course Schedule

Number Name Quarter
35201 Cases in Financial Management 2013 (Fall)
35800 Investments I 2013 (Fall)
35800 Investments 2014 (Summer)
35902 Theory of Financial Decisions II 2014 (Winter)

2014 - 2015 Course Schedule

Number Name Quarter
35201 Cases in Financial Management 2014 (Fall)
35902 Theory of Financial Decisions II 2015 (Winter)

Other Interests

Travel, running, basketball, baseball.

 

Research Activities

Corporate finance; household finance; financial intermediation; subprime mortgages; syndicated loans; corporate liquidity and investment.

"Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans," Journal of Finance (2007).

"Creditor Control Rights and Firm Investment Policy," Journal of Financial Economics (2009).

"The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," Quarterly Journal of Economics (2009).

"The Political Economy of the U.S. Mortgage Default Crisis," American Economic Review (forthcoming).

"House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis," American Economic Review (forthcoming).

For a listing of research publications please visit ’s university library listing page.

New: House Price Gains and U.S. Household Spending from 2002 to 2006
Date Posted: Jul  23, 2014
We examine the effect of rising U.S. house prices on borrowing and spending from 2002 to 2006. There is strong heterogeneity in the marginal propensity to borrow and spend. Households in low income zip codes aggressively liquefy home equity when house prices rise, and they increase spending substantially. In contrast, for the same rise in house prices, households living in high income zip codes are unresponsive, both in their borrowing and spending behavior. The entire effect of housing wealth on spending is through borrowing, and, under certain assumptions, this spending represents 0.8% of GDP in 2004 and 1.3% of GDP in 2005 and 2006. Households that borrow and spend out of housing gains between 2002 and 2006 experience significantly lower income and spending growth after 2006.

REVISION: House Price Gains and U.S. Household Spending from 2002 to 2006
Date Posted: May  17, 2014
We examine the effect of rising U.S. house prices on borrowing and spending from 2002 to 2006. There is strong heterogeneity in the marginal propensity to borrow and spend. Households in low income zip codes aggressively liquefy home equity when house prices rise, and they increase spending substantially. In contrast, for the same rise in house prices, households living in high income zip codes are unresponsive, both in their borrowing and spending behavior. The entire effect of housing wealth on spending is through borrowing, and, under certain assumptions, this spending represents 0.8% of GDP in 2004 and 1.3% of GDP in 2005 and 2006. Households that borrow and spend out of housing gains between 2002 and 2006 experience significantly lower income and spending growth after 2006.

REVISION: What Explains the 2007-2009 Drop in Employment?
Date Posted: Mar  01, 2014
We show that deterioration in household balance sheets, what we refer to as the housing net worth channel, played a significant role in the sharp decline in U.S. employment between 2007 and 2009. Using geographical variation across U.S. counties, we show that counties with a larger decline in housing net worth experience a larger decline in non-tradable employment. This result is not driven by industry-specific supply-side shocks, exposure to the construction sector, policy-induced business uncertainty, or contemporaneous credit supply tightening. We find little evidence of labor market adjustment in response to the housing net worth shock. There is no expansion in the tradable sector in affected counties, and the correlation between the housing net worth decline and job losses in the tradable sector is zero. There is no evidence of wage adjustment, or of net labor emigration out of affected counties either.

REVISION: Foreclosures, House Prices, and the Real Economy
Date Posted: Feb  01, 2014
From 2007 to 2009, states without a judicial requirement for foreclosures were more than twice as likely to foreclose on delinquent homeowners. Comparing zip codes close to state borders with differing foreclosure laws, we show that foreclosure propensity and housing inventory jumped discretely as one entered non-judicial states. There is no jump in other homeowner attributes such as credit scores, income, or education levels. Using state judicial requirement as an instrument for foreclosures, we show that foreclosures led to a large decline in house prices, residential investment, and consumer demand from 2007 to 2009. As foreclosures subsided from 2011 to 2013, the difference between foreclosure rates in non-judicial and judicial requirement states shrank and we find evidence of a stronger recovery in non-judicial states.

REVISION: Dynamic Risk Management
Date Posted: Sep  07, 2013
Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk management is limited and that more financially constrained firms hedge less or not at all. We show that these predictions are consistent with the evidence using panel data for fuel price risk management by airlines. More constrained airlines hedge less

REVISION: Household Balance Sheets, Consumption, and the Economic Slump
Date Posted: Jun  07, 2013
We investigate the consumption consequences of the 2006 to 2009 housing collapse using the highly unequal geographic distribution of wealth losses across the United States. We estimate a large elasticity of consumption with respect to housing net worth of 0.6 to 0.8, which soundly rejects the hypothesis of full consumption risk-sharing. The average marginal propensity to consume (MPC) out of housing wealth is 5 to 7 cents with substantial heterogeneity across zip codes. Zip codes with poorer and

REVISION: Housing, Monetary Policy, and the Recovery
Date Posted: Sep  06, 2012
While the economy shows signs of strength, the recovery remains tepid relative to economic upswings following deep recessions of the past. This weakness has occurred despite an aggressive monetary response by the Federal Reserve which has adopted even unconventional tools to reduce long term interest rates. A variety of factors have been blamed for the tepid recovery, including the financial crisis of 2008, uncertainty over policy, and high levels of indebtedness. In this report, we focus on we

REVISION: Creditor Control Rights, Corporate Governance, and Firm Value
Date Posted: Dec  14, 2011
We provide evidence that creditors play an active role in the governance of corporations well outside of payment default states. By examining the SEC filings of all U.S. nonfinancial firms from 1996 through 2008, we document that, in any given year, between 10 percent and 20 percent of firms report being in violation of a financial covenant in a credit agreement. We show that violations are followed immediately with a decline in acquisitions and capital expenditures, a sharp reduction in leverag

New: The Effects of Fiscal Stimulus: Evidence from the 2009 ‘Cash for Clunkers’ Program
Date Posted: Sep  05, 2010
A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the

REVISION: Explaining Corporate Capital Structure: Product Markets, Leases, and Asset Similarity
Date Posted: Jun  28, 2010
Better measurement of the output produced and capital employed by firms substantially improves the ability to explain capital structure variation in the cross-section. For every firm, we construct the set of other firms producing the same output using the set of product market competitors listed in the firm’s public SEC filings. In addition, we improve measurement of capital structure by explicitly accounting for leased capital. These two steps increase the explanatory power of the average capit

New: The Great Recession: Lessons from Microeconomic Data
Date Posted: Jun  17, 2010
We highlight how a micro-level analysis of the Great Recession provides us with important clues to understand the origins of the crisis, the link between credit and asset prices, the feedback effect from asset prices to the real economy, and the role of household leverage in explaining the downturn. We hope that our discussion also serves as an example of the usefulness of incorporating microeconomic data and techniques in answering traditional macroeconomic questions.

REVISION: The Political Economy of the Subprime Mortgage Credit Expansion
Date Posted: Jun  15, 2010
We examine how special interests, measured by campaign contributions from the mortgage industry, and constituent interests, measured by the share of subprime borrowers in a congressional district, may have influenced U.S. government policy toward the housing sector during the subprime mortgage credit expansion from 2002 to 2007. Beginning in 2002, mortgage industry campaign contributions increasingly targeted U.S. representatives from districts with a large fraction of subprime borrowers. During

REVISION: House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis
Date Posted: May  21, 2010
Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 cents for every dollar increase in home

REVISION: Capital Structure and Debt Structure
Date Posted: Feb  19, 2010
Using a novel data set that records individual debt issues on the balance sheets of public firms, we demonstrate that traditional capital structure studies that ignore debt heterogeneity miss substantial capital structure variation. Relative to high credit quality firms, low credit quality firms are more likely to have a multi-tiered capital structure consisting of both secured bank debt with tight covenants and subordinated non-bank debt with loose covenants. We discuss the extent to which thes

REVISION: Household Leverage and the Recession of 2007 to 2009
Date Posted: Oct  19, 2009
We show that household leverage is an early and powerful predictor of the 2007 to 2009 recession. Counties in the U.S. that experienced a large increase in household leverage from 2002 to 2006 showed a sharp relative decline in durable consumption starting in the third quarter of 2006 – a full year before any significant change in unemployment. Similarly, counties with the highest reliance on credit card borrowing reduced durable consumption by significantly more following the financial crisis o

New: House Prices, Home Equity-Based Borrowing, and the U.S. Household Leverage Crisis
Date Posted: Oct  01, 2009
Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the sharp rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 to 30 cents for every dollar incre

New: The Real Effects of Debt Certification: Evidence from the Introduction of Bank Loan Ratings
Date Posted: Sep  24, 2009
I examine the introduction of syndicated bank loan ratings by Moody's and Standard & Poor's in 1995 to evaluate whether third-party rating agencies affect firm financial and investment policy. The introduction of bank loan ratings leads to an increase in the use of debt by firms that obtain a rating, and also increases in firms' asset growth, cash acquisitions, and investment in working capital. Consistent with a causal effect of the ratings, the increase in debt usage and investment is concentr

New: Bank Lines of Credit in Corporate Finance: An Empirical Analysis
Date Posted: Sep  23, 2009
I empirically examine the factors that determine whether firms use bank lines of credit or cash in corporate liquidity management. I find that bank lines of credit, also known as revolving credit facilities, are a viable liquidity substitute only for firms that maintain high cash flow. In contrast, firms with low cash flow are less likely to obtain a line of credit, and they rely more heavily on cash in their corporate liquidity management. An important channel for this correlation is the use of

REVISION: The Political Economy of the U.S. Mortgage Default Crisis
Date Posted: Jun  02, 2009
We examine the effects of constituent interests, special interests, and politician ideology on congressional voting behavior on two of the most significant pieces of legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008. Representatives from districts experiencing an increase in mortgage default rates are more likely to vote in favor of the AHRFPA, and the response is stronger in more competit

New: Financial Contracting: A Survey of Empirical Research and Future Directions
Date Posted: Mar  12, 2009
We review recent evidence and future directions for empirical research on financial contracting in the context of corporate finance. Specifically, we survey evidence pertaining to incentive conflicts, control rights, collateral, renegotiation, and interactions between financial contracts and other governance mechanisms. We also discuss directions for future research, concluding that the financial contracting approach offers a potentially fruitful perspective for empirical researchers seeking to

REVISION: The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis
Date Posted: Dec  30, 2008
We conduct a within-county analysis using detailed zip code level data to document new findings regarding the origins of the biggest financial crisis since the Great Depression. The recent sharp increase in mortgage defaults is significantly amplified in subprime zip codes, or zip codes with a disproportionately large share of subprime borrowers as of 1996. Prior to the default crisis, these subprime zip codes experience an unprecedented relative growth in mortgage credit. The expansion in mortg

New: The Political Economy of the U.S. Mortgage Default Crisis
Date Posted: Nov  21, 2008
We examine the determinants of congressional voting behavior on two of the most significant pieces of federal legislation in U.S. economic history: the American Housing Rescue and Foreclosure Prevention Act of 2008 and the Emergency Economic Stabilization Act of 2008. We find evidence that constituent interests and special interests influence voting patterns during the crisis. Representatives from districts experiencing an increase in mortgage default rates are significantly more likely to vote

New: Capital Structure and Debt Structure
Date Posted: Nov  18, 2008
Using a novel data set that records individual debt issues on the balance sheet of a large random sample of rated public firms, we show that a recognition of debt heterogeneity leads to new insights into the determinants of corporate capital structure. We first demonstrate that traditional capital structure studies that ignore debt heterogeneity miss a substantial fraction of capital structure variation. We then show that relative to high credit quality firms, low credit quality firms are more l

REVISION: Renegotiation of Financial Contracts: Evidence from Private Credit Agreements
Date Posted: Aug  20, 2008
Using a large sample of private credit agreements between US publicly traded firms and financial institutions, we show that over 90% of long-term debt contracts are renegotiated prior to their stated maturity. Renegotiations result in large changes to the amount, maturity, and pricing of the contract, occur relatively early in the life of the contract, and are rarely a consequence of distress or default. Our analysis of the determinants of renegotiation reveal that the accrual of new information

REVISION: Control Rights and Capital Structure: An Empirical Investigation
Date Posted: Aug  20, 2008
We show that incentive conflicts between firms and their creditors have a large impact on corporate debt policy. Net debt issuing activity experiences a sharp and persistent decline following debt covenant violations, when creditors use their acceleration and termination rights to increase interest rates and reduce the availability of credit. The effect of creditor actions on debt policy is strongest when the borrower's alternative sources of finance are costly. In addition, despite the less fav

REVISION: Creditor Control Rights and Firm Investment Policy
Date Posted: May  25, 2008
We present novel empirical evidence that conflicts of interest between creditors and their borrowers have a significant impact on firm investment policy. We examine a large sample of private credit agreements between banks and public firms and find that 32% of the agreements contain an explicit restriction on the firm's capital expenditures. Creditors are more likely to impose a capital expenditure restriction as a borrower's credit quality deteriorates, and the use of a restriction appears at l

New: The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis
Date Posted: May  05, 2008
We demonstrate that a rapid expansion in the supply of mortgages driven by disintermediation explains a large fraction of recent U.S. house price appreciation and subsequent mortgage defaults. We identify the effect of shifts in the supply of mortgage credit by exploiting within-county variation across zip codes that differed in latent demand for mortgages in the mid 1990s. From 2001 to 2005, high latent demand zip codes experienced large relative decreases in denial rates, increases in mortgage

REVISION: The Real Effects of Debt Certification: Evidence from the Introduction of Bank Loan Ratings
Date Posted: Oct  05, 2006
I examine the introduction of syndicated bank loan ratings by Moody's and Standard & Poor's in 1995 to evaluate whether third-party rating agencies affect firm financial and investment policy. I find that the introduction of bank loan ratings leads to an increase in the use of debt by firms that obtain a rating, and in increases in firms' asset growth, cash acquisitions, and investment in working capital. A loan level analysis demonstrates that borrowers that obtain a loan rating gain increase

REVISION: Bank Lines of Credit in Corporate Finance: An Empirical Analysis
Date Posted: Jun  28, 2006
I empirically examine the factors that determine whether firms use bank lines of credit or cash in corporate liquidity management. Bank lines of credit, also known as revolving credit facilities, are a viable liquidity substitute only for firms that maintain high cash flow. Firms with low cash flow are less likely to obtain a line of credit, and rely more heavily on cash in their corporate liquidity management. An important channel for this correlation is the use of cash flow-based financial

REVISION: Information Asymmetry and Financing Arrangements: Evidence from Syndicated Loans
Date Posted: Mar  27, 2006
I empirically explore the syndicated loan market, with an emphasis on how information asymmetry between lenders and borrowers influences syndicate structure and on which lenders become syndicate members. Consistent with moral hazard in monitoring, the lead bank retains a larger share of the loan and forms a more concentrated syndicate when the borrower requires more intense monitoring and due diligence. When information asymmetry between the borrower and lenders is potentially severe, particip

Dynamic Inefficiencies in Insurance Markets: Evidence from Long-Term Care Insurance
Date Posted: Feb  04, 2005
We examine whether unregulated, private insurance markets efficiently provide insurance against reclassification risk (the risk of becoming a bad risk and facing higher premiums). To do so, we examine the ex-post risk type of individuals who drop their long-term care insurance contracts relative to those who are continually insured. Consistent with dynamic inefficiencies, we find that individuals who drop coverage are of lower risk ex-post than individuals who were otherwise-equivalent at the ti

Does Joint Production of Lending and Underwriting Help or Hurt Firms? A Fixed Effects Approach
Date Posted: Nov  29, 2004
The relaxation of restrictions on commercial bank underwriting, culminated in the passage of the Financial Services Modernization Act of 1999, has initiated a major change in debt underwriting markets facing borrowing firms, as financial institutions are now able to jointly produce private lending and corporate debt underwriting services. Using fixed effects regressions on a panel of 4553 debt issues by 509 firms from 1990 to 2003, I find that issuing firms receive a 10 to 15 percent reduction i

The Changing Landscape of the Financial Services Industry: What Lies Ahead?
Date Posted: Sep  03, 2004
This paper examines the consequences of the Financial Services Modernization Act of 1999 for the structure of the U.S. financial services industry. We ask how the industry may evolve as this new legislation interacts with the consolidation trend already under way, what types of mergers are most likely to occur, and how profitable and risky the resulting firms might be.

Who Goes to College? Differential Enrollment by Race and Family Background
Date Posted: Nov  12, 2002
While trends in college enrollment for blacks and whites have been the subject of study for a number of years, little attention has been paid to the variation in college enrollment by socioeconomic status (SES). It is well documented that, controlling for family background, blacks are more likely to enroll in college than whites. This relationship is somewhat deceptive, however. Upon closer examination, we find that blacks are more likely to enroll in college than their white counterparts only a