Josef Zechner

Josef Zechners research has contributed to unify asset pricing theory with corporate finance. Several of his papers derive valuation models for corporate claims in the presence of default risk. He has developed (jointly with Robert Heinkel and Edwin Fischer) a corporate bond pricing model which explicitly allows firms to adjust their capital structure or to default on their debt at any point in time. This model has become one of the standard references in the capital structure and bond valuation literature. More recently he has extended corporate bond pricing to relate the valuation models to standard credit risk measures, such as expected default frequencies (EDFs) and Value-at-Risk, and to derive a theory of optimal debt maturity (jointly with Thomas Dangl).
In another series of papers, he has derived asset pricing models which account for the fact that firm's ownership structures influence their corporate governance and therefore their fundamental values. In particular shareholder activism will depend on ownership concentration. Thus, the portfolio decisions of investors generally affect securities prices. The implications for equilibrium pricing, portfolio holdings and the degree of shareholder activism have been derived in a paper joint with Anat Admati and Paul Pfleiderer. The implications of shareholder activism and ownership structure on IPO design and IPO pricing have been explored in a paper joint with Neal Stoughton.
A third major strand of research focuses on the effects of governance in the asset management industry. The traditional asset pricing literature does not consider the fact that individual securities are frequently not held directly by individual investors but via institutions such as mutual funds or closed-end funds. In many instances investment decisions are therefore delegated to a portfolio manager who is in turn chosen by a portfolio management company. In a paper (joint with Thomas Dangl and Youchang Wu), he explores the management companies' incentives to replace portfolio managers, to choose particular portfolio risk levels, to decide how actively a fund should be managed and what management fee should be charged. In an empirical study (joint with Russ Wermers and Youchang Wu) he analyses the effect of governance on closed end fund discounts.
The above papers have been published in leading finance and economics journals such as the Journal of Finance, the Journal of Financial Economics, the Journal of Political Economy, the Review of Financial Studies and the Journal of Business.

Working papers