| Lubomir P. Litov Assistant Professor of Finance
Phone: (314) 935-5740
Fellow
|
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Research Interests
"Large Investors, Price Manipulation, and Market Breakdown - An Anatomy
of Market Corners,"
(with Franklin
Allen and J.P. Mei)
PDF
and Slides,
Review of Finance, 2006, Vol. 63: 645-693. Large investors can impact market returns and liquidity through
speculative trading. This paper builds up a model able to generate equilibria
with market corners and then reviews historical evidence on the extreme
situation of market corners, characterizing their liquidity effects and
the circumstances under which corners occur.
"Corporate Governance and Managerial Risk Taking"
(with Kose
John and Bernard Yeung)
PDF
and Slides,
Journal of Finance, 2008, Vol. 63-1679-1728.
Managers skimming corporate resources avoid taking risky (yet value
enhancing) projects because perk consumption is a "senior" debt-like claim
on the corporate cash flow. We develop and test this hypothesis, finding
support for it in a large international panel.
"Earnings Persistence"
(invited discussion with
Richard Frankel)
PDF,
forthcoming, Journal of Accounting and Economics.
"Can Mutual Fund Managers Pick Stocks? Evidence from Their Trades Prior to Earnings Announcements" (with Malcolm Baker, Jessica Wachter, and Jeffrey Wurgler) PDF and Slides, forthcoming, Journal of Financial and Quantitative Analysis. This paper tests whether mutual fund managers' trades predict future earnings announcements returns. This approach gets around the usual "joint hypothesis" problem in mutual fund performance studies.
"Corporate Governance and Financing Policy: New Evidence"
(with Kose
John)
PDF and Slides
Corporate governance mechanisms designed to align managers and shareholders
have a variety of important effects on financing decisions. The tension between
investment policy distortions and financing policy distortions due to agency may
results in higher leverage for firms with entrenched managers.
"Financial Account Characteristics and Debt Covenants"
(with
Richard Frankel)
PDF
We test whether accounting-based
covenants are more likely when asymmetric timeliness is higher and accounting
discretion is reduced. Overall, we find little association between the use of
accounting-based covenants in lending agreements and three financial reporting
characteristics.
"Creditor Rights and Corporate Risk-Taking"
(with
Viral Acharya and
Yakov Amihud)
PDF
Strong creditors have the ability to reduce
value-enhancing risk-taking.
"Corporate Strategy, Analyst Coverage, and the Uniqueness Paradox" (wth Todd Zenger and Patrick Moreton) PDF
Unique corporate strategies generate economic rents. Such strategies are difficult to analyze. Paradoxically, firms that pursue such strategies are discounted in financial markets.