My research spans dynamic contracting, financial intermediation, and international finance. My most recent work on financial intermediation analyzes the interplay between financial regulation and risk-taking incentives in the financial sector. The corresponding papers are published in top general interest journals (Econometrica) and leading field journals such as the Journal of Economic Theory, the Journal of Financial Economics and the Journal of International Economics. The paper “Target revaluation after failed takeover attempts - Cash versus stock” won the 2016 Jensen prize for the best paper published in the Journal of Financial Economics in the areas of corporate finance and organizations (first place). My favorite papers are “Impatience versus incentives,” “Only time tell: A theory of deferred compensation,” and “Rating agencies in the face of regulation.” I have been a board member of the Finance Theory Group since September 2016. I won the 2017 Poets and Quants “Top 40 under 40” award for professors of world-wide business schools and the 2018 Marianne and Marcus Wallenberg foundation grant (~USD 450k).
(7) “Target after Failed Takeover Attempts - Cash versus Stock,” 2016, joint with Ulrike Malmendier & Farzad Saidi, Journal of Financial Economics, 119, 92-106. Winner of 2016 Jensen Prize for the best Corporate Finance paper published in the Journal of Financial Economics. Online Appendix
Main insight: Capital markets interpret a cash offer as a economically large and positive signal about the fundamental value of target resources (in contrast to a stock offer). We expose a significant look-ahead bias affecting the previous literature on this topic.
Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.
(5) “Markup cycles, dynamic misallocation, and amplification,” 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
(4) “Rating agencies in the face of regulation,” 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61. Winner of the 2016 Emerald Citation Award.
(3) “Expropriation risk and technology,” 2012, Journal of Financial Economics, 103, 113-129. Winner of the 2008 John Leusner Award for the best dissertation at the University of Chicago in the field of Finance.
(2) “Tariff wars in a Ricardian model with a continuum of goods,” 2010, Journal of International
Economics, 80, 212-225.
(1) “Rybczynski's theorem in the Heckscher-Ohlin world - anything goes,” 2009, joint with Hugo
Sonnenschein & Christis Tombazos, Journal of International Economics, 79, 137-142.
Completed working papers:
(8) “Bank capital and the composition of credit,” June 2017, joint with Milton Harris and Christian Opp
Abstract: We propose a general equilibrium framework to analyze the cross-sectional distribution of credit and its exposure to shocks to the financial system, such as changes to bank capital, capital requirements, and interest rates. We characterize how over- and underinvestment in different parts of the borrower distribution are linked to the capitalization of the banking sector and the distribution of borrowers' risk characteristics and bank dependence. Our model yields a parsimonious asset pricing condition for firms' cost of capital that sheds light on heterogeneity in interest rate pass-through across borrower types, as well as its dependence on the health of the banking sector.
(9) “Only time will tell: a theory of deferred compensation,” December 2017, joint with Florian Hoffmann and Roman Inderst, R&R.
Abstract: We characterize optimal contracts in settings where the principal observes informative signals over time about the agent's one-time action. If both are risk-neutral contract relevant features of any signal process can be represented by a deterministic informativeness process that is increasing over time. The duration of pay trades off the gain in informativeness with the costs resulting from the agent's liquidity needs. The duration is shorter if the agent's outside option is higher, but may be non-monotonic in the implemented effort level. We discuss various applications of our characterization, such as to compensation regulation or the optimal maturity structure of an entrepreneur's financing decisions.
(10) “Regulating deferred incentive pay,” February 2018, joint with Florian Hoffmann and Roman Inderst, R&R. (major update soon)
Abstract: Deferral regulation acts as Pigouvian tax.
Work in progress:
Abstract: We expose that a reform of capital regulation for insurance companies in 2009/2010 eliminated (to a first-order approximation) capital requirements for holdings of non-agency mortgage backed securities. Post reform, insurance companies allocate 54% of their purchases of new MBS issues toward non-investment grade assets (as opposed to 6% pre reform), a large increase in risk-taking.
Abstract: A basic insurance model.