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Marcus M.
Opp Ph.D. Finance
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Home | Curriculum Vitae | Research | Teaching | Finance Theory Group
I received my Ph.D. in Finance at the University of Chicago in 2008 (Chair: Doug Diamond). My research spans contract theory, financial intermediation, and international finance. The corresponding papers are published in top general interest journals (Econometrica and Review of Economic Studies) and leading field journals such as the Journal of Economic Theory, the Journal of Financial Economics and the Journal of International Economics. My most recent work (joint with Martin Oehmke) analyzes the economics of socially responsible investment (EFA 2020 best paper prize in responsible finance). I have served as a board member of the Finance Theory Group from 2016 to 2018. The paper “Target revaluation after failed takeover attempts - Cash versus stock” won the 2016 Jensen prize for the best paper published in the Journal of Financial Economics in the areas of corporate finance and organizations (first place). Moreover, i have been awarded the 2017 Poets and Quants “Top 40 under 40” award for professors of world-wide business schools, the 2018 Marianne and Marcus Wallenberg foundation grant (~USD 450k) and the 2018 Riksbankens Jubileumsfonds (~USD 250k). Research overview: Research statement and Google Scholar Profile 1) Financial regulation, financial intermediaries (banks, rating agencies): (4), (9), (10), (11). 2) Contract and relationship dynamics: (3), (5), (6), (8). 3) International/ macro: trade theory, DSGE models: (1), (2), (5).
Publications:
(8) “Only time will tell: a theory of deferred compensation,” 2020, joint with Florian Hoffmann and Roman Inderst (Forthcoming at Review of Economic Studies). Online Appendix. Main insight: This paper characterizes optimal compensation contracts in principal-agent settings in which the consequences of the agent's action are only observed over time.
(7) “Target Revaluation after Failed Takeover Attempts - Cash versus Stock,” 2016, joint with Ulrike Malmendier & Farzad Saidi, Journal of Financial Economics, 119, 92-106. Winner of 2016 Jensen Prize for the best Corporate Finance paper published in the Journal of Financial Economics. Online Appendix Main insight: Capital markets interpret a cash offer as a economically large and positive signal about the fundamental value of target resources (in contrast to a stock offer). We expose a significant look-ahead bias affecting the previous literature on this topic.
(6) “Impatience versus incentives,” 2015, joint with John Zhu, Econometrica, 83, 1601-1617. Presentation Slides from Econometric Society Meeting, Boston 2015. Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.
(5) “Markup cycles, dynamic misallocation, and amplification,” 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
(4) “Rating agencies in the face of regulation,” 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61. Winner of the 2016 Emerald Citation Award.
(3) “Expropriation risk and technology,” 2012, Journal of Financial Economics, 103, 113-129. Winner of the 2008 John Leusner Award for the best dissertation at the University of Chicago in the field of Finance.
(2) “Tariff wars in a Ricardian model with a continuum of goods,” 2010, Journal of International
Economics, 80, 212-225. (1) “Rybczynski's theorem in the Heckscher-Ohlin world - anything goes,” 2009, joint with Hugo
Sonnenschein & Christis Tombazos, Journal of International Economics, 79, 137-142. Completed working papers: (9) “The aggregate demand for bank capital,” 2020, joint with Milton Harris and Christian Opp. Abstract: We propose a novel conceptual approach to transparently characterizing credit market outcomes in economies with multi-dimensional borrower heterogeneity. Based on characterizations of securities' implicit demand for bank equity capital, we obtain closed-form expressions for the composition of credit, including a sufficient statistic for the provision of bank loans, and a novel cross-sectional asset pricing relation for securities held by regulated levered institutions. Our framework sheds light on the compositional shifts in credit prior to the 07/08 financial crisis and the European debt crisis, and can provide guidance on the allocative effects of shocks affecting both banks and the cross-sectional distribution of borrowers. (10) “The economics of deferral and clawback requirements,” 2020, joint with Florian Hoffmann and Roman Inderst (2nd revise and resubmit at Journal of Finance). Abstract: We analyze the effects of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements restricting (incentive) compensation of material risk-takers in the financial sector. Moderate deferral requirements have a robustly positive effect on equilibrium risk-management effort only if the bank manager's outside option is sufficiently high, else, their effectiveness depends on the dynamics of information arrival. Stringent deferral requirements unambiguously backfire. We characterize when regulators should not impose any deferral regulation at all, when it can achieve second-best welfare, when additional clawback requirements are of value, and highlight the interaction with capital regulation.
(11) “Regulatory forbearance in the U.S. insurance industry: The effects of eliminating capital requirements,” 2020, joint with Bo Becker and Farzad Saidi (revise and resubmit at Review of Financial Studies). Abstract: This paper documents the long-run effects of an important reform of capital regulation for U.S. insurance companies in 2009. We show that its design effectively eliminates capital requirements for non-agency MBS. By 2015, 40% of all high-yield assets in the overall fixed-income portfolio are MBS investments, driven primarily by insurers' reduced propensity to sell poorly-rated assets in their existing portfolios. Using a regression discontinuity framework, we can attribute this behavior to capital requirements. We also provide evidence that following the reform, the insurance industry, in particular large life insurers, crowds out other investors in the new issuance of (high-yield) MBS.
Work in progress:
(12) “A theory of socially responsible investment,” 2020, joint with Martin Oehmke. Winner of EFA 2020 best paper prize in responsible finance. Abstract: We characterize necessary conditions for socially responsible investors to impact firm behavior in a setting in which firm production generates social costs and is subject to financing constraints. Impact requires a broad mandate, in that socially responsible investors need to internalize social costs irrespective of whether they are investors in a given firm. Impact is optimally achieved by enabling a scale increase for clean production. Socially responsible and financial investors are complementary: jointly they can achieve higher welfare than either investor type alone. When socially responsible capital is scarce, it should be allocated based on a social profitability index (SPI). This micro-founded ESG metric captures not only a firm's social status quo but also the counterfactual social costs produced in the absence of socially responsible investors.
(13) “Green capital requirements." 2020, joint with Martin Oehmke.
References:
WEB DESIGN by Natalia Kovrijnykh:September 20, 2020 |
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