My research interests include financial networks, market efficiency, investments, portfolio management, market microstructure, mergers and acquisitions, banking, and financial reporting. Recent work, "Creditor Governance", has been featured on the Oxford Business Law Blog, the Columbia Law School Blue Sky Blog, and the Harvard Law School Bankruptcy Roundtable Blog.
The graphic is a representation of "average" - that is, middle 50% of the distribution - North American bank executives in 2004. They are average with regard to degree centrality, the number of people they are directly connected to via company boards. The dots are executives, and the colored lines between them are the industries of the boards they jointly serve. Purple lines are banking boards, green are hedge funds and specialty finance boards, etc.
In "Executive Network Centrality and Stock Market Liquidity", published in Financial Management, Professor Jarred Egginton and I examine the relationship between stock market liquidity and the network centrality of firm executives. We find that that firms whose executives are more central in the network of executives have narrower bid-asked spreads. We use an exogenous network centrality shock of executive turnover and report that liquidity improves after firms hire executives with greater centrality. We present evidence that improved liquidity is attributable to efficient information flows around executives in more advantageous network positions.
Hedge funds investors want alpha, right? Well, not necessarily. Alpha doesn't make hedge fund investors wealthy. Returns do. In "Beta Active Hedge Fund Management", published in the Journal of Financial and Quantitative Analysis, Professors Jun Duanmu, Alexey Malakhov and I look at whether "beta" hedge fund managers (typically thought of as managers using "passive" investment strategies..and therefore less skilled than managers who produce alpha) are able to deliver superior long-term returns to investors. The punch line is that in the short term, "beta" managers do not produce alpha, but over the long term, they do. Sure enough, those managers that are able to identify changing economic conditions and profit from them - regardless of "alpha" in the short term - deliver superior performance to investors. In other words, "beta" managers outperform "alpha" managers.
Do personal connections matter in contracting? Of course they do. But more generally, does social capital (think reputation and goodwill) matter? In "CFO Social Capital and Private Debt", published in the Journal of Corporate Finance, Professors Kathy Fogel, Tomas Jandik, and I find that firms whose CFOs have greater social capital negotiate large bank loans with lower spreads and fewer covenant restrictions, even taking all direct relationships into account. In other words, these CFOs negotiate better deals. Interestingly, these better and cheaper loans are not "buddy buddy" deals - they are appropriately priced. This means that banks' trust of CFOs with greater social capital is appropriate.
I am fortunate to work with a small army of like-minded and talented researchers. Together we are working on numerous projects, including the relationship between financial networks and market efficiency, global liquidity, mergers and acquisitions, reporting quality, executive compensation, shareholder litigation, data breaches, hedge and mutual fund performance, IPO performance, and more.