Finance Webinar（2020-15)

Topic: Dynamic Strategic Corporate Finance:A Tug of War with Financial Frictions

Speaker: Joao Gomes, University of Pennsylvania

Time: Friday, 9 October,10:00-11:30 amBeijing Time

Location: Microsoft Teams Online conference room

Abstract:

This paper develops and analyzes a benchmark theoretical setting that integrates the basic corporate finance insights about the impact of financial frictions on investment under perfect competition with the literature on dynamic industrial organization that implicitly assumes a perfect financial market. We highlight three key findings. First, we find that financial frictions generally lead firms to charge lower prices in equilibrium. Second, we find that financial frictions often slow down industry concentration. In this sense, both of these findings show that financial frictions can act as a pro-competitive force. Finally, and perhaps most surprisingly, we find that even if financial frictions lead to a more concentrated industry in the long run, this often involves higher investment along the way, even though access to external funds is now costly.

Introduction:

Joao F. Gomes is the Howard Butcher III, Professor of Economics and Finance at the Wharton School of the University of Pennsylvania. He earned his bachelor’s degree from Nova SBE in Lisbon, and his Masters and Doctorate in Economics from the University of Rochester.

Professor Gomes’ two main areas of research are on the impact of macroeconomic events and policies on financial markets and on understanding and improving the corporate investment and financing decisions of firms. His recent research has reevaluated the effects of financial leverage on the cost of capital, the causes of performance variation across asset classes, and the importance of financial market imperfections on economic fluctuations.

Professor Gomes’ research has been presented and discussed at major academic conferences and seminar series around the world and is published in the top rated academic journals in both economics and finance. He has won several awards including the Smith Breeden Prize for Best Asset Pricing Paper published in the Journal of Finance, with a study on the links between leverage and returns, and was nominated for the Brattle Prize for Best Corporate Finance Paper in the same journal, with earlier work on the performance of conglomerates.

Currently, Professor Gomes is a co-editor of Economics Letters, associate editor of the Journal of Monetary Economics and a regular consultant of the U.S. Federal Reserve System. Previously, he was a Visiting Professor of Finance at the London Business School and served as an economic advisor to the Ministry of Industry of Portugal.

At Wharton, Professor Gomes has taught several courses on various aspects of macroeconomics and financial markets to undergraduate, MBA and doctoral students. He has also designed and led multiple sessions for executives and policymakers. Professor Gomes is also regularly invited to speak at many other leading universities and research centers.

//fnce.wharton.upenn.edu/profile/gomesj/

Your participation is warmly welcomed!