Finance

Finance is a featured research topic at Harvard Business School.
 
Our intellectual roots are based in a long line of scholars from Robert Merton whose collaborative work on risk management and option pricing won him the Nobel Prize in Economics in 1997, to John Lintner who co-created the Capital Asset Pricing Model and made significant contributions to dividend policy, and Gordon Donaldson whose work helped shape the field of corporate finance. We strive to understand how managers and firms make value-enhancing decisions; and how financial institutions, markets, and instruments contribute to this process. Our approach to research is distinguished by its unique combination of theory, empirical analysis, mathematical modeling, and field observations at companies. 
  1. Shisong Cardiac Center: Kumbo, Cameroon

    Kevin Schulman and Nelly-Ange Konthcou

    Shisong Cardiac Center in Kumbo, Cameroon, is a regional cardiac referral center in central Africa. As the continent transitions from communicable to non-communicable diseases, there is a critical shortage of surgical care required to treat these conditions. This case describes an innovation solution to the shortage of professional skills, an international collaboration between a hospital in Milan and a hospital in Cameroon. The case highlights the challenges of building and staffing the facility, and then discusses the ongoing operational and financial challenges of operating a heart center in Africa. Can this model be sustained? Can Cameroon develop their own capability to deliver advanced cardiac services domestically? These are critical questions to consider. In spite of these challenges, Co-Founder Sr. Alphonsa finds hope in her favorite African proverb, “Your heart can take you where your feet cannot.”

    Keywords: Finance; Operations; Health Industry; Africa;

    Citation:

    Schulman, Kevin, and Nelly-Ange Konthcou. "Shisong Cardiac Center: Kumbo, Cameroon." Harvard Business School Case 317-085, January 2017. View Details
  2. The Six CEOs of Tyco International Ltd.

    John R. Wells and Gabriel Ellsworth

    In September 2016, Johnson Controls, Inc., completed the acquisition of Tyco International PLC, a $9.9 billion business with operating profits of $884 million. The purchase consideration was $14.4 billion. Although the deal was billed as a merger, Ireland-based Tyco effectively acquired U.S.-based Johnson Controls in a tax inversion deal that saved $150 million a year in taxes. Operating synergies were estimated at $500 million over three years. Tyco International was all that remained of what 15 years earlier, in 2001, had been a $36.4 billion conglomerate with a market capitalization of $120 billion. It took the charismatic CEO, Dennis Kozlowski, 10 years to grow the business from $3 billion to $36 billion, increasing its value by more than 60 times along the way. But Kozlowski went to prison on fraud charges in 2005, and the portfolio was slowly unwound under his successor. Now in 2016, Tyco was to disappear.

    Keywords: Tyco; Dennis Kozlowski; Edward Breen; fire safety; fire protection; Security; packaging; Securities and Exchange Commission; fraud; Accounting; Accounting Audits; Earnings Management; Financial Statements; Goodwill Accounting; Acquisition; Mergers and Acquisitions; Business Conglomerates; Business Divisions; Business Exit or Shutdown; Business Growth and Maturation; Business Headquarters; Business Model; Business Organization; For-Profit Firms; Restructuring; Crime and Corruption; Engineering; Applied Optics; Chemicals; Construction; Metals and Minerals; Ethics; Finance; Cash Flow; Public Equity; Stock Options; Financing and Loans; Initial Public Offering; Profit; Revenue; Geographic Location; Geographic Scope; Global Range; Globalized Firms and Management; Multinational Firms and Management; Corporate Accountability; Corporate Disclosure; Health Care and Treatment; Business History; Executive Compensation; Selection and Staffing; Courts and Trials; Lawfulness; Lawsuits and Litigation; Business or Company Management; Goals and Objectives; Growth and Development Strategy; Market Entry and Exit; Public Ownership; Problems and Challenges; Strategy; Business Strategy; Competition; Competitive Strategy; Competitive Advantage; Consolidation; Corporate Strategy; Diversification; Expansion; Horizontal Integration; Value; Chemical Industry; Construction Industry; Consumer Products Industry; Electronics Industry; Energy Industry; Industrial Products Industry; Manufacturing Industry; Medical Devices and Supplies Industry; Mining Industry; Pharmaceutical Industry; Semiconductor Industry; Telecommunications Industry; Utilities Industry; Republic of Ireland; Switzerland; Bermuda; United States; New Hampshire;

    Citation:

    Wells, John R., and Gabriel Ellsworth. "The Six CEOs of Tyco International Ltd." Harvard Business School Case 717-459, January 2017. View Details
  3. Deutsche Bank: Structured Retail Products

    Boris Vallée and Jérôme Lenhardt

    Describes how Deutsche Bank, a leading bank in Europe, is deciding whether or not to launch a new structured retail product in Germany: an auto callable note. Will this product find a market and how does it fit into the bank’s product portfolio? The case investigates how Deutsche Bank manufactures and distributes its structured retail products, and more broadly explores the opportunities and challenges of offering financial products to households. The case also dwells on the scale and scope of business of retail banking in an increasingly regulated environment.

    Keywords: structured products; structured retail products; Germany; commercial banking; Financial Markets; asset management; asset pricing; auto callable note; financial product; financial product development; financial product marketing; financial product launch; financial product positioning; Finance; Assets; Asset Pricing; Asset Management; Capital Markets; Financial Institutions; Banks and Banking; Commercial Banking; Financial Instruments; Annuities; Bonds; Stocks; Financial Management; Financial Markets; Financial Strategy; Interest Rates; Investment;

    Citation:

    Vallée, Boris, and Jérôme Lenhardt. "Deutsche Bank: Structured Retail Products." Harvard Business School Case 217-037, November 2016. View Details
  4. Why They Do It: Inside the Mind of the White-Collar Criminal

    Eugene F. Soltes

    From the financial fraudsters of Enron, to the embezzlers at Tyco, to the Ponzi schemer Bernie Madoff, the failings of corporate titans are regular fixtures in the news. But what drives wealthy and powerful people to white-collar crime? I draw from extensive personal interaction and correspondence with nearly fifty former executives as well as research in psychology, criminology, and economics to investigate how once-celebrated executives become white-collar criminals.

    Keywords: Crime and Corruption; Corporate Finance;

    Citation:

    Soltes, Eugene F. Why They Do It: Inside the Mind of the White-Collar Criminal. New York: PublicAffairs, 2016. View Details
  5. Sovereign Risk, Currency Risk, and Corporate Balance Sheets

    Wenxin Du and Jesse Schreger

    Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption smoothing, issue more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt and nominal bond risks in the presence of risk-averse investors. In our model, low credibility governments inflate during recessions, generating excessively countercyclical inflation in addition to the standard inflationary bias. With countercyclical inflation, investors require risk premia on nominal debt, making nominal debt issuance costly for low credibility governments. We provide empirical support for this mechanism, showing that countries with higher nominal bond-stock betas have significantly larger nominal bond risk premia and borrow less in local currency.

    Keywords: Sovereign Finance; Business Cycles; Currency;

    Citation:

    Du, Wenxin, and Jesse Schreger. "Sovereign Risk, Currency Risk, and Corporate Balance Sheets." Harvard Business School Working Paper, No. 17-024, September 2016. View Details
  6. Western Technology Investment

    Ramana Nanda, William A. Sahlman and Nicole Keller

    Based in Portola Valley, California, Western Technology Investment (WTI) specialized in a hybrid form of debt and equity financing for early-stage companies. Like traditional venture capital and private equity firms, WTI raised funds from institutional investors and evaluated deals. However, instead of making initial investments in the form of equity, WTI focused primarily on lending money to start-ups, charging them interest and receiving warrants that could later be converted to stock in the case of a liquidity event. Most initial investments—usually in the range of $3–$5 million—were made in tandem with or following a company’s early rounds of venture capital equity financing. In addition, like more traditional venture capital investors, WTI hoped to participate in follow-on debt and equity investments in its successful portfolio companies.

    Keywords: entrepreneurial finance; venture capital; entrepreneurship; finance; Equity; Finance; California;

    Citation:

    Nanda, Ramana, William A. Sahlman, and Nicole Keller. "Western Technology Investment." Harvard Business School Case 817-019, September 2016. (Revised November 2016.) View Details
  7. MyTime

    Juliane Begenau and Robin Greenwood

    Ethan Anderson, the CEO of San Francisco–based e-commerce company MyTime, must decide on the company's growth strategy. MyTime’s first product was a website and mobile app that offered consumers a convenient way to book appointments with local merchants throughout the United States. Student must assess the company's growth strategy and develop a model to value a prospective customer to the company's website.

    Keywords: Customer valuation; discounted cash flow; software; valuation; valuation methodologies; subscriber models; Financial Management; Corporate Finance; Information Technology Industry; North and Central America;

    Citation:

    Begenau, Juliane, and Robin Greenwood. "MyTime." Harvard Business School Case 217-026, September 2016. (Revised September 2016.) View Details
  8. Financial Services at Falabella (A)

    C. Fritz Foley and Agustin M. Hurtado

    In 2010, the board and senior management team of Falabella, a leading retailer with operations throughout Latin America, faced choices about what to do with its financial services division. More than 4.5 million customers had CMR credit cards that could be used in Falabella stores, and Banco Falabella competed with other banks by offering personal banking services. The case covers many of the key questions the leaders of the firm faced, including whether to allow credit card holders to use their cards for purchases outside of Falabella stores, whether to develop personal banking services further, and whether to make substantial changes to the strategy or to exit the business.

    Keywords: Consumer credit; financial management; corporate strategy; financial institutions; Personal Finance; Financial Management; Financial Strategy; Corporate Strategy; Banking Industry; Retail Industry; Latin America; Chile; Argentina; Colombia; Peru;

    Citation:

    Foley, C. Fritz, and Agustin M. Hurtado. "Financial Services at Falabella (A)." Harvard Business School Case 217-016, September 2016. View Details
  9. Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy

    Wenxin Du, Carolin E. Pflueger and Jesse Schreger

    Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that monetary policy credibility explains the currency composition of sovereign debt and nominal bond risks in the presence of risk-averse investors. In our model, low credibility governments inflate during recessions, generating excessively countercyclical inflation in addition to the standard inflationary bias. With countercyclical inflation, investors require risk premia on nominal debt, making nominal debt issuance costly for low credibility governments. We provide empirical support for this mechanism, showing that countries with higher nominal bond-stock betas have significantly larger nominal bond risk premia and borrow less in local currency.

    Keywords: Sovereign Finance;

    Citation:

    Du, Wenxin, Carolin E. Pflueger, and Jesse Schreger. "Sovereign Debt Portfolios, Bond Risks, and the Credibility of Monetary Policy." NBER Working Paper Series, No. 22592, September 2016. View Details
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