Boris Vallee

Assistant Professor of Business Administration

Boris Vallee is an Assistant Professor in the Finance Unit of Harvard Business School. He teaches the Finance II course in the MBA required curriculum. 

He holds a Ph.D. In Finance and a M.Sc. in Management, both from HEC Paris. Before beginning his doctoral studies, Boris worked as an investment banking Associate at Deutsche Bank in London.

Professor’s Vallee research interests lie in corporate finance, household finance, public finance and financial institutions. His work focuses on the motives and effects of financial innovation.

Boris Vallee is an Assistant Professor in the Finance Unit of Harvard Business School. He teaches the Finance II course in the MBA required curriculum. 

He holds a Ph.D. In Finance and a M.Sc. in Management, both from HEC Paris. Before beginning his doctoral studies, Boris worked as an investment banking Associate at Deutsche Bank in London.

Professor’s Vallee research interests lie in corporate finance, household finance, public finance and financial institutions. His work focuses on the motives and effects of financial innovation.

Working Papers

  1. Political Incentives and Financial Innovation: The Strategic Use of Toxic Loans by Local Governments

    We examine the toxic loans sold by investment banks to local governments. Using proprietary data, we show that politicians strategically use these products to increase chances of being re-elected. Consistent with greater incentives to hide the cost of debt, toxic loans are utilized significantly more frequently within highly indebted local governments. Incumbent politicians from politically contested areas are also more likely to turn to toxic loans. Using a difference-in-differences methodology, we show that politicians time the election cycle by implementing more transactions immediately before an election than after. Politicians also exhibit herding behavior. Our findings demonstrate how financial innovation can foster strategic behaviors.

    Keywords: financial innovation; Political Elections; Financing and Loans; Innovation and Invention;

  2. Are Bankers Worth Their Pay? Evidence from a Talent Measure

    This paper investigates empirically the source of the wage premium in the finance industry. We exploit the ranking in a competitive examination to build a precise measure of talent. By using a comprehensive compensation survey among an educational elite, we show that wage returns to talent are relatively high in the finance industry. This higher sensitivity to talent explains both the finance wage premium and its evolution.

    Keywords: finance; compensation; Wages; Finance; Compensation and Benefits; Banking Industry;

    Citation:

    Vallee, Boris, and Claire Celerier. "Are Bankers Worth Their Pay? Evidence from a Talent Measure." Working Paper. View Details
  3. Call Me Maybe? The Effects of Exercising Contingent Capital

    This paper studies market reaction and economic performance following the first episode of banks triggering contingent capital options. During the financial crisis, European banks massively used embedded options in their hybrid bonds to reduce their debt burden. These triggers are positively received by debtors, while stockholders discriminate according to the type of resulting debt relief and the financial institution leverage. Moreover, banks that trigger permanent debt reliefs exhibit higher economic performance than the ones that do not. These findings point towards innovative debt instruments offering an effective solution to the dilemma of bank capital regulation.

    Keywords: financial distress; Financial Instruments; Financial Crisis; Banks and Banking; Banking Industry; Europe;

  4. What Drives Financial Complexity? A Look into the Retail Market for Structured Products

    By focusing on the highly innovative retail market for structured products, we investigate the drivers of financial complexity. We perform a lexicographic analysis of the term sheets of 55,000 retail structured products issued in 17 European countries since 2002. We observe that financial complexity has been steadily increasing, even after the recent financial crisis, and that financial complexity is more prevalent among distributors with a less sophisticated investor base. We then compute the fair value of a representative sample of products and show that the hidden markup in a product is an increasing function of its complexity. Finally, we show that financial complexity increases when competition intensifies. These findings are consistent with financial institutions strategically using complexity to mitigate competition.

    Keywords: Complexity; Finance; Retail Industry;