Current research

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