RESEARCH:

The core of my research is on how economic agents, firms and individuals, make and should make dynamic financing and investment decisions, and how dynamic decisions by individual agents play out in aggregate. This is an exciting and new field of research that is on the border of two mainstream finance subareas, asset pricing and corporate finance, and that has witnessed dramatic growth recently. One advantage of this framework is that it enables us to value various corporate securities parsimoniously using contingent claims analysis widely used in option pricing. Toni Whited and I have recently written a review of dynamic corporate finance, please see here.

Dynamic corporate finance is closely interwined with such important issues as financing and success of entrepreneurial firms, relation between financing and investment decisions for both high-growth and large companies, capital structure of banks and their borrowers, and the impact of regulation on corporate decisions.

Here are some examples of the issues that my co-authors and I have pursued recently within this broad research area: capital structure of banks and the impact of capital regulation, optimal dynamic financing policies of corporations; dynamic policies of abandoning innovative ventures; explaining various stylized facts such as low-leverage puzzle, equity premium, and credit risk puzzles; interactions between financial decision-making and pricing of corporate bonds; the macroeconomic impact of financial decisions; market-based estimation of default costs; empirical modeling of dynamic capital structure.

In addition, I have been working on various other theoretical and empirical issues. A couple of examples of my most recent research: in a series of papers my co-authors and I explore the long-term history of U.S. default rates and link them to macroeconomics indicators, banking crises, and institutional developments. As a part of this project, we constructed new dataset of long-term default rates, bond issuance, and financial leverage.

As another example, my co-authors and I investigate the evolution of the global stock ownership. We find that over the past fifty years invididual households transferred most of their direct shareholdings to institutional investors in all the countries for which we have data. The major factors behind this change are the two pillars of fiscal policy: personal taxes and retirement regulation. The results of this research have wide-ranging implications for our understanding of long-term consequences of taxation and for public policy development.

Please see all my published and working papers, as well as a brief description of selected work in progress, by selecting a corresponding link on the left. Or select "Community" and see links to my co-authors, alumni of the Stanford GSB Finance PhD Program, and miscellaneous research organizations of interest.