Kaushalendra Kishore

Date: 9/5/2018

Time: 12:00-1:30

Location: CSOM 1-123

Title: "Why Risk Managers"

Abstract:

A CEO relies on risk managers to prevent their employees from taking excessive risk. Why can't the CEO directly incentivize his employees by offering him the right contract instead of relying on the risk manager? I show that having a separate risk manager is not only more profitable for banks but is also socially efficient. I build a model where a CEO incentivizes an employee to choose between two projects based on his private signal and then exert effort on the project chosen. When the CEO incentivizes both tasks, there is a trade off between rent extracted by the employee and efficient project choice, and in equilibrium the CEO sacrifices some efficiency to reduce the rent extracted. But if the tasks are split between a trader who exerts effort and a risk manager who chooses the project, then efficient outcome can be achieved.  I further examine some reasons for risk management failure where a CEO may ignore the risk manager when he suggests that safe project or where the risk managers may not be able to coordinate their action to convince the CEO to choose the safe project.

Jincheng Tong 

Date: 9/12/2018

Time: 12:00-1:30

Location: CSOM 1-123

Title:"A Dynamic Agency Based Asset Pricing Model with Production"

Abstract:

We develop a dynamic-agency based production asset pricing model in General Equilibrium. The key agency friction is a lack of commitments problem: firm owners and workers cannot commit to any labor contract that provides continuation values below their outside options. We show that incomplete risk-sharing due to agency friction amplifies the conditional volatility of the pricing kernel. History-dependent wage contracts generate a form of labor-induced operating leverage, thus leading to heterogeneity in firms' risk exposures. The benefit of mitigating agency friction also creates additional incentives for firms’ investment. Quantitatively, we show that these implications of agency frictions allow us to jointly account for the high level and significant time-variation of the equity premium, a low and smooth risk-free interest rate, a sizable value premium and large cross-sectional standard deviation of firms’ investment.  Empirical results based on a variance decomposition of firms' investment in the data confirm our model mechanism. 

Wei Zhang

Date: 9/19/2018

Time: 12:00-1:30

Location: CSOM 1-123

Title:Bank Liquidity Supply and Corporate Investment in the 2008-2009 Financial Crisis

Abstract:

I use matching, loan-level, and firm-level regressions to study whether bank liquidity shocks affect corporate investment in the 2008-2009 crisis. The matching method exploits the predetermined variation of whether firms have lines of credit maturing in crisis to investigate whether firms with lines of credit maturing in crisis are more adversely affected. I find that firms whose last pre-crisis lines of credit mature in crisis (treated firms) cut investment by more. This effect is stronger for financially constrained firms and firms whose pre-crisis banks are unhealthy or have large exposures to mortgage-backed securities. Treated firms with unhealthy banks are less likely to obtain lines of credit in crisis than those with healthy banks. Using loan-level regressions, I find that unhealthy banks reduce lines of credit by more than healthy banks to the same firm. Firm-level regressions show that firms whose pre-crisis banks are unhealthy decrease the credit lines and investment growth by more. This effect is restricted to only unrated firms. In addition, bank liquidity supply shocks affect the composition of lines of credit and cash. Overall, this paper highlights the lines of credit channel through which bank liquidity supply shocks are transmitted to firms.

Yuchen Chen, Christos Kamaras, Alexandre Pecora

Date: 9/26/2018

Time: 12:00-1:00

Location: CSOM 1-123

Title:

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Keer Yang, Ramin Hassan

Date: 10/3/2018

Time:12:00-1:00

Location: CSOM 1-123

Title:

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Dan Su

Date: 10/10/2018

Time: 12:00-1:00

Location: CSOM 1-123

Title:

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Fangyuan Yu

Date:10/17/2018

Time: 12:00-1:00

Location: CSOM 1-123

Title:

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Chao Ying

Date: 10/24/2018

Time: 12:00-1:00

Location: CSOM 2-215 

Title:

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Xuelin Li

Date: 10/31/2018

Time: 12:00-1:00

Location: CSOM 1-123

Title:

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Yao Deng

Date: 11/7/2018

Time: 12:00-1:00

Location: CSOM 1-123

Title:

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