Curriculum Vitae (pdf)

Education

Ph.D., Financial Economics
Massachusetts Institute of Technology, Sloan School of Management, 1998-2002
Dissertation: “Integration and Corporate Investment”
Committee: Sendhil Mullainathan, David Scharfstein (Chair), Antoinette Schoar

M.S., Industrial Administration
Carnegie Mellon University, Graduate School of Industrial Administration, 1993-1995

B.S., Industrial Engineering
Bogazici University, Faculty of Engineering, 1989-1993


Research Interests

Corporate Finance, Corporate Investment, Internal Capital Markets, Economic Theory of Organizations, Law and Finance


Published Papers

Integration, Organizational Processes, and Allocation of Resources
Journal of Financial Economics, January 2005

Abstract: Does the level of integration of a firm affect the quality of information available to its top decision makers responsible for allocating resources? Motivated by the pervasiveness of specific knowledge in large multi-division firms, I develop a model of internal competition for corporate resources among specialist managers and show that: (i) managers of integrated firms exaggerate the payoffs of their projects to obtain resources despite potentially adverse career consequences, and (ii) the exaggeration problem worsens with increased integration and reduces the allocative efficiency of an integrated firm. Control rights based on asset ownership enable the firm to set "the rules of the game" and improve managerial behavior through organizational processes such as rigid capital budgets, job rotation, centralization and hierarchies.

Evidence on the Dark Side of Internal Capital Markets with David Scharfstein
Review of Financial Studies, February 2010

Abstract: This paper documents differences between the Q-sensitivity of investment of stand-alone firms and unrelated segments of conglomerate firms. Unrelated segments exhibit lower Q-sensitivity of investment than stand-alone firms. This fact is driven by unrelated segments of conglomerate firms that tend to invest less than stand-alone firms in high-Q industries. This finding is robust to matching on industry, year, size, age and profitability. The differences are more pronounced in conglomerates in which top management has small ownership stakes, suggesting that agency problems explain the investment behavior of conglomerates.

When Are Outside Directors Effective? with Ran Duchin and John Matsusaka
Journal of Financial Economics, May 2010

Abstract: This paper uses recent regulations that have required some companies to increase the number of outside directors on their boards to generate estimates of the effect of board independence on performance that are largely free from endogeneity problems. Our main finding is that the effectiveness of outside directors depends on the cost of acquiring information about the firm: when the cost of acquiring information is low, performance increases when outsiders are added to the board, and when the cost of information is high, performance worsens when outsiders are added to the board. The estimates provide some of the cleanest estimates to date that board independence matters, and the finding that board effectiveness depends on information cost supports a nascent theoretical literature emphasizing information asymmetry. We also find that firms compose their boards as if they understand that outsider effectiveness varies with information costs.

Market Segmentation and Cross-Predictability of Returns with Lior Menzly
Journal of Finance, August 2010

Abstract: We present evidence supporting the hypothesis that due to investor specialization and market segmentation, value-relevant information diffuses gradually in financial markets. Using the stock market as our setting, we find that (i) stocks that are in economically related supplier and customer industries cross-predict each other's returns, (ii) the magnitude of return cross-predictability declines with the number of informed investors in the market as proxied by the level of analyst coverage and institutional ownership, and (iii) changes in the stock holdings of institutional investors mirror the model trading behavior of informed investors.

Costly External Finance, Corporate Investment, and the Subprime Mortgage Credit Crisis with R. Duchin and B. Sensoy
Journal of Financial Economics, September 2010

Abstract: We study the effect of the recent financial crisis on corporate investment. The crisis represents an unexplored negative shock to the supply of external finance for non-financial firms. Corporate investment declines significantly following the onset of the crisis, controlling for firm fixed effects and time-varying measures of investment opportunities. Consistent with a causal effect of a supply shock, the decline is greatest for firms that have low cash reserves or high net short-term debt, are financially constrained, or operate in industries dependent on external finance. To address endogeneity concerns, we measure firms’ financial positions as much as four years prior to the crisis, and confirm that similar results do not follow placebo crises in the summers of 2003–2006. Nor do similar results follow the negative demand shock caused by September 11, 2001. The effects weaken considerably beginning in the third quarter of 2008, when the demand-side effects of the crisis became apparent. Additional analysis suggests an important precautionary savings motive for seemingly excess cash that is generally overlooked in the literature.

Club Deals in Leveraged Buyouts with Micah Officer and Berk Sensoy
Journal of Financial Economics, November 2010

Abstract: We analyze the pricing and characteristics of club deal leveraged buyouts (LBOs) – those in which two or more private equity partnerships jointly conduct an LBO. Using a comprehensive sample of completed LBOs of U.S. publicly traded targets conducted by prominent private equity firms, we find that target shareholders receive approximately 10% less of pre-bid firm equity value, or roughly 40% lower premiums, in club deals compared to sole-sponsored LBOs. This result is concentrated before 2006 and in target firms with low institutional ownership. These results are robust to controls for target and deal characteristics, including size, Q, measures of risk, and time and industry fixed effects. We find little support for benign motivations for club deals based on capital constraints, diversification motives, or the ability of clubs to obtain favorable debt amounts or prices, but it is possible that the lower pricing of club deals is an inadvertent byproduct of an unobserved benign motivation for club formation.

Corporate Diversification and the Cost of Capital with Rebecca Hann and Maria Ogneva
Journal of Finance, October 2013

Abstract: We examine whether organizational form matters for a firm's cost of capital. Contrary to conventional view, we argue that coinsurance among a firm's business units can reduce systematic risk through the avoidance of countercyclical deadweight costs. We find that diversified firms have on average a lower cost of capital than comparable portfolios of standalone firms. In addition, diversified firms with less correlated segment cash flows have a lower cost of capital, consistent with a coinsurance effect. Holding cash flows constant, our estimates imply an average value gain of approximately 5% when moving from the highest to the lowest cash flow correlation quintile.

Disclosure of Status in an Agency Setting with Anthony Marino
Journal of Economic Behavior and Organization, September 2014

Abstract: We develop a model in which the principal and the agent share private information about the value of the agent for a multi-agent organization. The principal can disclose private information and make public the relative standing or status of all agents in the organization. We study whether it is better in terms of profit and utility to disclose or to not disclose status to the group of agents. Conditions for the optimality of disclosure versus non-disclosure are characterized for the cases of exogenous and endogenous human capital.

A Theory of Shareholder Approval and Proposal Rights with John Matsusaka
Journal of Law, Economics, and Organization, May 2017

Abstract: This paper develops a theory of how shareholder decision rights over policies and directors affect firm value. The model highlights the distinction between the right to approve and the right to propose. The right to approve is weak; the right to propose is impactful but can help as well as hurt shareholders. Managers have an incentive to deter proposals from activist shareholders by adjusting corporate policy; one might conjecture that external pressure leads them to choose policies more appealing to other shareholders in order to reduce the electoral prospects of activist proposals. However, we show that when deterrence occurs, it is always by moving policy toward the position favored by the activist, even if this reduces shareholder wealth. Our analysis stresses the central role of voting uncertainty in determining the value consequences of shareholder rights and proxy access.

Opportunistic Proposals by Union Shareholders with John Matsusaka and Irene Yi
Review of Financial Studies, Forthcoming

Columbia Law School Blue Sky Blog

Abstract: Shareholder proposals are increasingly important tools for corporate reformers, yet courts, policy makers, and scholars are concerned that proposals may be used "opportunistically" as bargaining chips by activists to extract side payments from management. This paper investigates whether labor unions use proposals opportunistically to influence contract negotiations. Our empirical strategy relies on the observation that proposals have higher bargaining-chip value in contract expiration years, when a new contract must be negotiated. We find that in contract expiration years compared to nonexpiration years, unions increase their proposal rate by one-fifth, particularly proposals concerning executive compensation, while nonunion shareholders do not increase their proposal rate in expiration years. Union proposals made during expiration years are less likely to be supported by other shareholders or a leading proxy advisor; the market reacts negatively to union proposals in expiration years; and withdrawn union proposals are accompanied with higher wage settlements.


Working Papers

Can Shareholder Proposals Hurt Shareholders? Evidence from SEC No-Action Letter Decisions with John Matsusaka and Irene Yi

Harvard Law School Forum on Corporate Governance and Financial Regulation

Abstract: This paper studies the market reaction to SEC no-action letter decisions that determine whether a shareholder proposal can be excluded from the proxy statement. We find that over the period 2007-2018, the market reacted positively when the SEC permitted exclusion. Investors appear to have been most skeptical about proposals related to corporate governance and proposals at high-profit firms, suggesting that investors believe some proposals can hurt shareholders by disrupting companies that are already performing well. Disruption appears to come less from fear of the proposal being approved than from distraction of management and the possibility of side deals with activists. The evidence is compatible with the view that managerial resistance is based on a genuine concern that proposals can harm firm value, and suggests that the no-action letter process may increase value by sorting out value-destroying proposals.

Do Physiological and Spiritual Factors Affect Economic Decisions? with Cem Demiroglu, Rui Silva, and Mehmet Fatih Ulu

Abstract: We examine the effects of nutrition and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting from dawn to sunset and increased spiritual reflection in the Muslim faith. Using an administrative data set of all bank loans originated in Turkey during 2003-2013, we find that small business loans originated during Ramadan are about 10 to 15 percent more likely to become delinquent within two years of origination than loans originated outside of Ramadan. Despite their worse performance, Ramadan loans have lower credit spreads than non-Ramadan loans at origination. Consistent with Ramadan-induced judgment errors committed by individual loan officers, we find no relation between origination in Ramadan and the performance of personal loans which are mostly automated, and large business loans where approval decisions are made by credit committees. Loans granted by banks whose loan officers are more likely to observe the Ramadan perform worse, and so do loans originated on hot Ramadan days when adverse physiological effects of fasting are greatest, and loans that resemble charitable lending involving financially strong lenders. Our identification strategy addresses alternative explanations including seasonality and changing borrower and loan characteristics during Ramadan.

Managerial Discretion and Efficiency of Internal Capital Markets with Cem Demiroglu and Cansu Iskenderoglu

Abstract: This paper uses the staggered adoption of state-level antitakeover laws to provide causal evidence on whether managerial agency problems affect the allocative efficiency of conglomerate firms. Increases in control slack lead to sharp declines in the Q-sensitivity of investment. The effects are more pronounced for conglomerate firms under stronger pressure from the corporate control market prior to the adoption of antitakeover laws as well as for conglomerate firms with greater financial slack, dispersion of ownership, and diversity of investment opportunities. Our findings establish a novel organizational channel through which takeover threats impact the efficiency of resource allocation in the economy.


Work in Progress

Alpaslan Selvili Ozbas

Yavuz Selvili Ozbas


Old Working Papers

Executive Compensation and Deployment of Corporate Resources: Evidence from Working Capital

Information Acquisition, Resource Allocation and Managerial Incentives

Corporate Fraud and Real Investment

Organizational Scope and Allocation of Resources: Evidence on Rigid Capital Budgets

Cross-Industry Momentum


Teaching Experience

Professor, USC Marshall School of Business
PhD Course in Corporate Finance
MBA Core Course in Corporate Finance
MBA and Undergraduate Elective Case Course in Corporate Financial Strategy


Work Experience

Ford Motor Company, Treasury, 1995-1998

Finansbank, Treasury, June-August 1994

Bank of Industrial Investment & Credit, Project Finance, June-September 1992


Fellowships and Honors

Review of Financial Studies Distinguished Referee Award, 2013
Walter A. Rosenblith Fellow, Massachusetts Institute of Technology, 1998-2002
Elliott Dunlap Smith Award, Carnegie Mellon University, 1995
Outstanding Academic Achievement Award, Carnegie Mellon University, 1995
Best Student-Teacher Award, Carnegie Mellon University, 1995
Beta Gamma Sigma, Carnegie Mellon University, 1995
Henry Ford II Scholar, Ford Motor Company, 1994
National Scholar of the Turkish Education Foundation, 1993-1995
TOBB Scholar of the Union of Commodity Exchanges of Turkey, 1989-1993


Professional Activities

Invited Presentations
Harvard Business School (January 2002)
University of Illinois at Urbana-Champaign (January 2002)
University of Minnesota (January 2002)
University of Southern California (January 2002)
University of Michigan (February 2002)
University of Texas, Austin (February 2002)
NBER Organizational Economics Conference (December 2003)
Koç University (December 2003)
AFA Annual Meetings San Diego (January 2004)
University of California, Los Angeles (October 2004)
AFA Annual Meetings Philadelphia (January 2005)
FMA Annual Meetings Chicago (October 2005)
Bilkent University (June 2007)
NBER Summer Institute Corporate Finance (July 2007)
Michigan State University (December 2007)
UCI-UCLA-USC Finance Day (April 2008)
University of Washington (June 2008)
Arizona State University (September 2008)
EFA Annual Meetings Bergen Norway (August 2009)
AEA Annual Meetings Atlanta (January 2010)
Napa Conference on Financial Markets Research (May 2010)
Sabancı University (May 2010)
Koç Finance Conference (May 2010)
University of New South Wales (October 2010)
Chinese University of Hong Kong (October 2010)
University of Hong Kong (October 2010)
Hong Kong University of Science & Technology (October 2010)
Financial Economics and Accounting Conference (November 2010)
Purdue University (November 2010)
AFA Annual Meetings Denver (January 2011)
ECCCS International Workshop (March 2012)
Finance UC 2nd International Conference (June 2012)
Olin Corporate Finance Conference (November 2012)
AFA Annual Meetings San Diego (January 2013)
NBER Law and Economics Program (March 2013)
University of California, San Diego (March 2013)
University of Amsterdam (March 2013)
Ohio State University (March 2013)
Tsinghua Finance Workshop (June 2013)
China International Conference in Finance Shanghai (July 2013)
EFA Annual Meetings Cambridge UK (August 2013)
Borsa Istanbul Finance and Economics Conference (September 2013)
AFA Annual Meetings Philadelphia (January 2014)
London School of Economics (March 2014)
Norwegian School of Economics (September 2014)
Bilkent University (November 2014)
WHU Otto Beisheim School of Management (December 2014)
University of Cologne (December 2014)
Kadir Has University (December 2014)
Özyeğin University (May 2015)
Sabancı University (June 2015)
Workshop on Corporate Governance and Investment at Sabancı University (September 2016)
Conference on Empirical Legal Studies at Duke University (November 2016)
AFA Annual Meetings Chicago (January 2017)
UC Riverside (February 2017)
Tinbergen Institute (March 2017)
HEC Paris (March 2017)
Purdue University (March 2017)
BI Norwegian Business School (May 2017)
AFA Annual Meetings Philadelphia (January 2018)
NBER Law and Economics Program (February 2018)
Stockholm School of Economics (June 2018)
Koç Finance Conference (July 2018)
University of Pittsburgh (September 2018)
Nova School of Business and Economics (September 2018)

Program Committee
Western Finance Association (2010-present)
European Finance Association (2011-present)
Midwest Finance Association (2016, 2019)
Financial Management Association (Napa 2012-present, Europe 2012, USA 2015 Track Chair)
Society for Financial Studies Finance Cavalcade (2011)
China International Conference in Finance (2013)
Financial Economics and Accounting Conference (2004, 2012)
Olin Conference on Corporate Finance (2013-present)

Discussions
Financial Economics and Accounting Conference (November 2004)
Utah Winter Business Economics Conference (March 2006)
AFA Annual Meetings Chicago (January 2007)
AFA Annual Meetings New Orleans (January 2008), Session Chair
Conference on Empirical Legal Studies Los Angeles (November 2009)
Michigan Mitsui Finance Symposium (May 2010)
WFA Annual Meetings Victoria (June 2010)
AFA Annual Meetings Denver (January 2011)
AFA Annual Meetings San Diego (January 2013)
SFS Finance Cavalcade Miami (May 2013)
Tsinghua Finance Workshop (June 2013)
China International Conference in Finance Shanghai (July 2013), Session Chair
WFA Annual Meeting Seattle (June 2015)
SFS Finance Cavalcade Toronto (May 2016), Session Chair
FIRS Conference Lisbon (June 2016)
FMA European Doctoral Student Consortium Helsinki (2016)
Workshop on Corporate Governance and Investment (2016)
SFS Finance Cavalcade Nashville (2017), Session Chair
Finance, Organizations and Markets Conference (2017), Co-organizer

Professional Membership
American Economic Association
American Finance Association
Society for Financial Studies
Western Finance Association


Referee Work

American Economic Review, Economic Inquiry, Emerging Markets Finance and Trade, Journal of Accounting and Economics, Journal of Economic Behavior and Organization, Journal of Economics and Management Strategy, Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Financial Intermediation, Journal of Law, Economics and Organization, Journal of Law, Finance and Accounting, Management Science, Quarterly Journal of Economics, RAND Journal of Economics, Review of Finance, Review of Financial Studies, The Accounting Review


Dissertation Committees

Irene Yi (Purdue University, 2017), Sakya Sarkar (Tulane University, 2015), Chao Zhuang (First Quadrant, 2014), Haitao Mo (Louisiana State University, 2013), Derek Horstmeyer (George Mason, 2012), Joshua Shemesh (University of Melbourne, 2011), Salvatore Miglietta (BI Norwegian School of Management, 2010), Breno Schmidt (Emory University, 2009), Ran Duchin (University of Michigan, 2008), Qing Ma (Cornell University, 2006)


Other Service

Doctoral Program Committee (Current)

Committee on Research and Faculty Recognition, Graduate Curriculum Committee, FBE Recruiting Committee, Doctoral Qualifying Exam Committee, Doctoral Admissions Committee, Finance Seminar Series Organizer (Past)


References

Denis Gromb, HEC Paris
1 rue de la Libération 78350 Jouy-en-Josas, France
E-mail: gromb@hec.fr

David Scharfstein, Harvard Business School
Baker Library 239, Boston, MA 02163
E-mail: dscharfstein@hbs.edu

Antoinette Schoar, MIT Sloan School of Management
100 Main Street, E62-638, Cambridge, MA 02142
E-mail: aschoar@mit.edu