I obtained my PhD in
Finance from the Vienna Graduate School of Finance in 2013. My research focuses
on theoretical and empirical corporate finance questions that lie in the
intersection of corporate finance and asset pricing. It addresses to two
interlinked questions: How are a firm’s financing and investment decisions
influenced by the conditions on financial markets and how, in turn, does a
firm’s behavior affect its security prices. I have written on the relationship
between a firm’s investment decisions and its stock option prices, on the
effect of agency conflicts, market liquidity, and government policies on a
firm’s incentive to deleverage, and on the cross section of bankruptcy costs
and their importance for the capital structure decision.
Working Papers | Work in Progress | Teaching | CV
Working
papers 
- "Deleveraging
Via Asset Sales: Agency Costs, Taxes, and Government Policies"
presented at the AFA 2014
Abstract: Do equityholders of
a financially distressed firm have an incentive to buy back debt to achieve a
more sustainable leverage ratio and avoid costly bankruptcy? I develop a dynamic
structural model incorporating a dynamic game to determine conditions under
which a firm would voluntarily do so. It allows me to assess the impact of
debt-overhang and asset substitution on the restructuring decision and the
holdout problem. I find that as long as the total firm value increases through
the debt repurchase, equityholders benefit from it,
as well. In a dynamic setting, the debt overhang problem takes the form of too
early restructuring. Taxes on cancellation of debt income and government
subsidies to debtholders can destroy equityholders'
incentives; so does low liquidity in the market for the firm's assets; an asset
purchase program fosters them. Finally, via threatening not to tender,
debtholders can appropriate a large share of the firm's restructuring gains.
However, they cannot stop equityholders from gambling
for resurrection, which in turn gives equityholders
bargaining power to prevent debtholders from holding out.
- "Market
Implied Costs of Financial Distress"
with Neal Stoughton and Josef Zechner,
R&R Review of Financial Studies
Abstract: This paper takes a novel approach to estimating
bankruptcy costs by inference from market prices of equity and put options
using a dynamic structural model of capital structure. This approach avoids the
selection bias of looking at firms in or near default and therefore permits
theories of ex ante capital structure determination to be tested. We
identify significant cross sectional variation in bankruptcy costs across
industries and relate these to specific firm characteristics. We find that
asset volatility and growth options have significant positive impacts, while
tangibility and size have negative impacts. Our bankruptcy cost variable
estimate significantly negatively impacts leverage ratios. This negative impact
is in addition to that of other firm characteristics such as asset intangibility
and asset volatility. The results provide strong support for the tradeoff
theory of capital structure.
- "The
Cross-Section of Expected Returns and Option Prices"
Abstract: I find a novel explanation for the volatility
smile pattern across firms: firms' real investment decisions. First, I show
empirically that the cross-section of volatility smiles can be explained by the
Fama-French factors. This result is puzzling in that
option prices, for which the implied volatility surface is just a metric, are
affected by determinants of the expected return of the underlying. Second, I
provide a rationale for this finding by developing a theoretical model that
links a firm's stock option price to its investment decision. In the model,
investment options and operating leverage not only establish a relationship
between the Fama-French factors and expected stock
returns but also make the volatility of the firm's equity state dependent. Via
this connection, the factors are also related to the theoretical option prices.
The relationship even holds in a Black-Scholes world, where expected stock
returns have no effect on option prices. I find the model's predictions
concerning the correlation between the size and book-to-market factor and the
volatility smile to fit very well the empirical stylized facts.
Work
in Progress
- Do
Bond Covenants Prevent Asset Substitution - Using a Novel Estimation
Approach, with Alexander Schandlbauer.
Abstract: This paper investigates in how far bond
covenants are able to mitigate the well-known asset substitution problem. Using
the simple intuition that such risk-shifting is most likely to occur in times
of financial distress, we examine a comprehensive sample of defaulted companies
between 2000 and 2013 and analyze whether those firms have in fact engaged in
risk-shifting activities prior to default. To identify the unobservable
risk-shifting behavior, we employ a simple structural model of the firm and
develop a novel conditional simulated method of moments estimation approach.
Our results indicate that companies whose bonds have at least one covenant
associated are less likely to engage in risk-shifting compared to companies
without any bond-covenants.
- Do
Bond Covenants Prevent Asset Substitution - Using a Novel Estimation
Approach, with Di Cui and Oyvind Norli.
Abstract: Theory suggests that traders will be more
reluctant to trade on negative private information about an ongoing merger if
their trading will cause the merger to be canceled. This paper provides evidence
on the existence of such feedback between prices and corporate decisions. Using
the existence of an acquirer termination fees as a proxy for the commitment not
to cancel the transaction, we show that post announcement acquirer stock prices
contain more firm-specific information when such a commitment exists than when
it does not exist. This suggest that investors with negative private
information are more willing to trade on their information when managers are
prevented from using this information to adjust their decisions.
Teaching
- Multinational
Corporate Finance
Course Description