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Profile
Erwan Morellec is a Full Professor of Finance at the Swiss Finance Institute (SFI) @ EPFL and the holder of a Swiss Finance Institute senior chair. He is the Head of the SFI nation-wide PhD Program and a CEPR Research Fellow.
Erwan is an internationally recognized expert in corporate finance, corporate governance, and sustainable finance and has taught courses on these subjects at EPFL, HEC Lausanne, MIT Sloan, and the University of Rochester. His research has been presented at major academic conferences and seminar series around the world and is published in the leading academic journals in finance such as the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, and Management Science. Erwan has received several research and teaching awards. He holds a PhD in Finance summa cum Laude from HEC Paris.
A theory of dynamic blockholder ownership and firm policies
(with Sebastian Gryglewicz and Simon Mayer)
We develop a theory of blockholder activism, in which a blockholder can expend costly effort to improve firm productivity, contract with management to limit agency costs, and influence investment and financing decisions. Starting with an initial toehold, the blockholder may also adjust its stake over time, shaping engagement and firm policies and potentially leading to a takeover bid or an exit. We analytically characterize the blockholder’s dynamic trading strategy, its entry and exit decisions, and the firm’s compensation, financing, and investment policies. A key feature of the model is the endogenous and dynamic nature of the blockholder’s stake, which implies that the allocation of control rights over policies has divergent effects in static versus dynamic contexts.
Investor Activism and the Green Transition
(with Sebastian Gryglewicz and Simon Mayer)
We develop a model in which activist investors contribute to a firm’s green transition by exerting effort and contracting with management. Due to moral hazard, only skilled activists can facilitate this transition. However, if the acquisition price of their equity stake accounts for the value of activism, reflecting a free-rider problem, skilled activists either avoid investing or favor firms that can transition independently. Combined, moral hazard and the free-rider problem imply that investor activism only aids the transition when the financial benefits of transitioning are small or activists have strong sustainability preferences. Carbon taxation strengthen these mechanisms, hindering impact activism.
Relationship capital and financing decisions
with Thomas Geelen and Natalia Rostova, Management Science Forthcoming.
The dynamics of loan sales and lenders incentives
with Sebastian Gryglewicz and Simon Mayer, Review of Financial Studies 37(8): 2403-2460, 2024
Takeover protections and asset prices
with Aassaf Eisdorfer and Alexei Zhdanov, Management Science 70(11): 8116-8133, 2024.
Asset Life, Leverage, and Debt Maturity Matching
with Thomas Geelen, Jakub Hajda, and Adam Winegar, Journal of Financial Economics 154(4), 2024
Can corporate debt foster innovation and growth?
with Thomas Geelen and Jakub Hajda, Review of Financial Studies 35(9): 4152-4200, 2022
Understanding cash flow risk
with Sebastian Gryglewicz, Loriano Mancini, Enrique Schroth, and Philip Valta, Review of Financial Studies 35(8): 3922-3973, 2022
Optimal financing with tokens
with Sebastian Gryglewicz and Simon Mayer, Journal of Financial Economics 142(3): 1038-1067, 2021
Short-term debt and incentives for risk-taking
with Marco Della Seta and Francesca Zucchi, Journal of Financial Economics 137(1): 179-203, 2020
Agency conflicts and short- vs. long-termism in corporate policies
with Sebastian Gryglewicz and Simon Mayer, Journal of Financial Economics 136(3), 718-742, 2020
Product market competition and option prices
with Alexei Zhdanov, Review of Financial Studies 32(11): 4343-4386, 2019
Agency conflicts around the world
with Boris Nikolov and Norman Schuerhoff, Review of Financial Studies, 31(11): 4232-4287, 2018
Data: Firm level governance indices across 14 countries
Corporate policies with permanent and transitory shocks
with J-P Décamps, Sebastian Gryglewicz, and Stéphane Villeneuve, Review of Financial Studies, 30(1): 162-210, 2017
Bank capital, liquid reserves, and insolvency risk
with Julien Hugonnier, Journal of Financial Economics, 125(2): 266–285, 2017
Mathematical Appendix to the Paper
Debt enforcement, investment, and risk-taking across countries
with Giovanni Favara, Enrique Schroth, and Philip Valta, Journal of Financial Economics,123(1): 22-41, 2017
Capital supply uncertainty, cash holdings and investment
with Julien Hugonnier and Semyon Malamud, Review of Financial Studies, 28(2): 391–445, 2015
Mathematical Appendix to the Paper
Credit market frictions and capital structure dynamics
with Julien Hugonnier and Semyon Malamud, Journal of Economic Theory, 157: 1130–1158, 2015
Mathematical Appendix to the Paper
Financing investment: The choice between bonds and bank loans
with Philip Valta and Alexei Zhdanov, Management Science, 61(11): 2580-2602, 2015
Corporate governance and capital structure dynamics
with Boris Nikolov and Norman Schuerhoff, Journal of Finance, 67(3): 803-848, 2012
Corporate investment and financing under asymmetric information
with Norman Schuerhoff, Journal of Financial Economics, 99(2): 262-288, 2011
Dynamic investment and financing under personal taxation
with Norman Schuerhoff, Review of Financial Studies, 23(1): 101-146, 2010
Financing and takeovers
with Alexei Zhdanov, Journal of Financial Economics, 87(3): 556-581, 2008
Stock returns in mergers and acquisitions
with Dirk Hackbarth, Journal of Finance, 63(3): 1203-1242, 2008
Closed-form solutions to stochastic switching problems
with Pascal François, Journal of Mathematical Economics, 44(11): 1072-1083, 2008
Agency conflicts and risk management
with Clifford W. Smith, Review of Finance, 11(1): 1-23, 2007
Corporate control and real investment in incomplete markets
with Julien Hugonnier, Journal of Economic Dynamics and Control, 31(5): 1781-1800, 2007
Capital structure, credit risk, and macroeconomic conditions
with Dirk Hackbarth and Jianjun Miao, Journal of Financial Economics, 82(3): 519-550, 2006
On the debt capacity of growth options
with Michael J. Barclay and Clifford W. Smith, Journal of Business, 79(1): 37-59, 2006
Irreversible investment with regime shifts
with Xin Guo and Jianjun Miao, Journal of Economic Theory, 122(1): 37-59, 2005
The dynamics of mergers and acquisitions
with Alexei Zhdanov, Journal of Financial Economics, 77(3): 649-672, 2005
Can managerial discretion explain observed leverage ratios?
Review of Financial Studies, 17(1): 257-294.
Capital structure and asset prices: Some effects of bankruptcy procedures
with Pascal François, Journal of Business, 77(2): 387-411, 2004
Asset liquidity, capital structure, and secured debt
Journal of Financial Economics, 61(2): 173-206, 2001.
Introduction to Finance (MFE program): This course provides a market-oriented framework for analyzing the major types of financial decisions made by corporations. Lectures and readings will provide an introduction to present value techniques, capital budgeting principles and problems, asset valuation, the operation and efficiency of financial markets, the financial decisions of firms, and derivatives. Throughout the class, we will solve problems to enhance our understanding of the covered topics.
Sustainable debt (SFI Master Class):
Co-taught with: Mark Keller, Director ESG Financing UBS.
ESG compliant assets are projected to grow, and reach a third of total assets under management by 2025. While the interest in sustainable investing initially focused on public equity markets, it has recently evolved into fixed income. Building on industry practice and recent academic insights, this Master Class provides participants with an in-depth understanding of sustainable debt. Using the latest available data, the co-presenters discuss implementation approaches and both the opportunities and the shortcomings of current practice. Overall, the Master Class aims to equip banking and finance professionals with up-to-date, relevant, high-level knowledge about sustainable debt.
Dynamic Corporate Finance (SFI PhD program): This course is designed to provide a framework for understanding the determinants of corporate investment, financing, payout, hedging, and compensation policies. The course will provide both an economic analysis of the determinants of each policy and a quantitative analysis of the effects of these determinants. Readings are based on scientific articles. Topics covered: Investment under Uncertainty; Optimal Financing, Optimal Liquidity Management, Optimal Contracting through the lens of dynamic models featuring moral hazard, adverse selection, financing frictions, taxes, and/or competition.