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. Barclays Bank, 2008

    Lucy White, Steve Burn-Murdoch and Jerome Lenhardt

    In the midst of the financial crisis, Barclays (the world's 4th largest bank by assets) is forced by UK regulators to raise more capital. Should it take up the UK government's offer to invest, or take funding from investors from the Middle East? Students may price the two deals to determine which is more expensive, and must decide whether avoiding the constraints of government ownership is worth the extra cost.

    Keywords: government and business; option contract; corporate finance; finance; bank capital; bank regulation; Finance; Banking Industry; Europe; North and Central America;


    White, Lucy, Steve Burn-Murdoch, and Jerome Lenhardt. "Barclays Bank, 2008." Harvard Business School Case 215-027, October 2014. View Details
  2. International Trade, Multinational Activity, and Corporate Finance

    C. Fritz Foley and Kalina Manova

    An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations, and, as a consequence, influence aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

    Keywords: Multinational Firms and Management; Trade; Corporate Finance;


    Foley, C. Fritz, and Kalina Manova. "International Trade, Multinational Activity, and Corporate Finance." NBER Working Paper Series, No. 20634, October 2014. View Details
  3. Sovereigns, Upstream Capital Flows and Global Imbalances

    Laura Alfaro, Sebnem Kalemli-Ozcan and Vadym Volosovych

    We construct measures of net private and public capital flows for a large cross-section of developing countries considering both creditor and debtor side of the international debt transactions. Using these measures, we demonstrate that sovereign-to-sovereign transactions account for upstream capital flows and global imbalances. Specifically, we find (1) international net private capital flows (inflows minus outflows of private capital) are positively correlated with countries' productivity growth; (2) net sovereign debt flows (government borrowing minus reserves) are negatively correlated with growth only if net public debt is financed by another sovereign; (3) net public debt financed by private creditors is positively correlated with growth; and (4) public savings are strongly positively correlated with growth, whereas the correlation between private savings and growth is flat and statistically insignificant. These empirical facts contradict the conventional wisdom and constitute a challenge for the existing theories on upstream capital flows and global imbalances.

    Keywords: current account; aid/government debt; reserves; puzzles; productivity; Sovereign Finance; Developing Countries and Economies; Macroeconomics;


    Alfaro, Laura, Sebnem Kalemli-Ozcan, and Vadym Volosovych. "Sovereigns, Upstream Capital Flows and Global Imbalances." Journal of the European Economic Association 12, no. 5 (October 2014): 1240–1284. (Also NBER Working Paper 17396. Online Appendix. See International capital flows database for the data on measures of net private and public capital flows for a large cross-section of developing countries.) View Details
  4. The Road to Kolkata: NH-34 and PPP in India

    Arthur I Segel, Siddharth Yog and Ben Eppler

    In 2014, Arjun Dhawan (MBA 2004), President of HCC Concessions, is working toward the completion of his largest road development project yet. The route, a 250-km stretch leading from the critical eastern Indian port of Kolkata into the interior of the province of West Bengal, is a prime example of both the benefits and the drawbacks of Public-Private Partnerships in the Indian transportation sector. Despite delays and political pressure, HCC Concessions has nearly finished building the road, and now is receiving offers to purchase the project's equity.

    Keywords: india; real estate; infrastructure; roads; transportation; finance; project finance; Property; Infrastructure; Finance; Construction Industry; Financial Services Industry; India;


    Segel, Arthur I., Siddharth Yog, and Ben Eppler. "The Road to Kolkata: NH-34 and PPP in India." Harvard Business School Case 215-007, September 2014. (Revised December 2014.) View Details
  5. Fresno's Social Impact Bond for Asthma

    John A. Quelch and Margaret L. Rodriguez

    In 2014, Social Impact Bonds (SIBs) were quickly gaining popularity as an investment vehicle which joined together private investors and nonprofits to tackle social issues. Although numerous SIB projects and proposals had cropped up across the U.S. following the launch of the first SIB in the UK in 2010, none were explicitly focused on healthcare. Fresno, California announced the first healthcare SIB in 2013 to fund home-based programs to reduce asthma attacks. If successful, the Fresno SIB model would help solve the challenge of delivering preventative care efficiently in at-risk communities.

    Keywords: social enterprise; health care; marketing; bonds; financing; asthma; air pollution; air quality; chronic disease; public health; Health; Health Care and Treatment; Finance; Health Industry; Financial Services Industry; United States;


    Quelch, John A., and Margaret L. Rodriguez. "Fresno's Social Impact Bond for Asthma." Harvard Business School Case 515-028, September 2014. View Details
  6. Government Debt Management at the Zero Lower Bound

    Robin Greenwood, Samuel G. Hanson, Joshua S. Rudolph and Lawrence Summers

    This paper re-examines government debt management policy in light of the U.S. experience with extraordinary fiscal and monetary policies since 2008. We first document that the Treasury's decision to lengthen the average maturity of the debt has partially offset the Federal Reserve's attempts to reduce the supply of long-term bonds held by private investors through its policy of quantitative easing. We then examine the appropriate debt management policy for the consolidated government. We argue that traditional considerations favoring longer-term debt may be overstated, and suggest that there are several advantages to issuing greater quantities of short-term debt. Under current institutional arrangements, neither the Federal Reserve nor the Treasury is caused to view debt management policy on the basis of the overall national interest. We suggest revised institutional arrangements to promote greater cooperation between the Treasury and the Federal Reserve in setting debt management policy. This is particularly important when conventional monetary policy becomes constrained by the zero lower bound, leaving debt management as one of the few policy levers to support aggregate demand.

    Keywords: Government Debt; Sovereign Finance; Borrowing and Debt; United States;


    Greenwood, Robin, Samuel G. Hanson, Joshua S. Rudolph, and Lawrence Summers. "Government Debt Management at the Zero Lower Bound." Hutchins Center Working Paper, No. 5, September 2014. View Details
  7. Molycorp: Morgan Brother's Reverse Convertible Notes (C)

    Benjamin C. Esty and E. Scott Mayfield

    In August 2011, Morgan Brothers Bank was issuing a $2.5 million reverse convertible note with payoffs linked to the price of Molycorp's common stock. These financially engineered securities were just one of many kinds of structured notes available in the retail market. Investors must decide whether the notes were fairly priced and whether they offered a favorable risk-return trade-off.

    Keywords: structured products; reverse convertible notes; replication; option pricing; bond pricing; debt securities; financial engineering; Valuation; Metals and Minerals; Debt Securities; Finance; Investment; Mining Industry; Financial Services Industry; Canada; California;


    Esty, Benjamin C., and E. Scott Mayfield. "Molycorp: Morgan Brother's Reverse Convertible Notes (C)." Harvard Business School Case 215-002, August 2014. View Details
  8. Rick's Dilemma

    Arthur I. Segel, Charles F. Wu, Sid Yog and Ben Eppler

    In 2014, Rick is serving as a trustee for a large family trust whose principle asset is a plot of prime real estate in the Upper East Side of Manhattan. The land is currently subject to a ground lease which pays $4.6 million annually, with resets every 20 years at 4.5% of the appraised value of the land. The next reset is in 2022, and in the meantime Rick must make a decision on whether it might be better for the trust's beneficiaries to sell the land early. If so, what price should he seek?

    Keywords: finance; real estate; New York Property; Appraisal Methods; valuation methodologies; Property; Finance; Real Estate Industry; New York (city, NY); United States;


    Segel, Arthur I., Charles F. Wu, Sid Yog, and Ben Eppler. "Rick's Dilemma." Harvard Business School Case 215-006, August 2014. View Details
  9. Husk Power

    Joseph B. Lassiter III and Sid Misra

    In late 2013, Husk Power Systems found itself falling further and further behind plan. The founding CEO had decided to resign. His co-founder is faced with the decision of quitting his corporate job in the US to head to India and help form a new management team. Husk is an Indian startup founded in 2007 with the goal of global rural electrification. The company has decided to pivot from operating biomass gasification plants towards developing solar microgrids in India and East Africa.

    Keywords: Plant-Based Agribusiness; Business Model; Business Startups; Energy Generation; Renewable Energy; Social Entrepreneurship; Foreign Direct Investment; International Finance; Globalized Markets and Industries; Crime and Corruption; Employee Relationship Management; Independent Innovation and Invention; Employment; Leadership Style; Leading Change; Management Practices and Processes; Management Style; Management Succession; Management Skills; Emerging Markets; Social Psychology; Culture; Business Strategy; Agriculture and Agribusiness Industry; Energy Industry; Green Technology Industry; Utilities Industry; Africa; India; United States;


    Lassiter, Joseph B., III, and Sid Misra. "Husk Power." Harvard Business School Case 815-023, August 2014. (Revised November 2014.) View Details
  10. Making Room for the Baby Boom: Senior Living

    Charles F. Wu, Joseph Beyer and Arthur I. Segel

    Tom Alperin's National Development has purchased a building site in affluent Wellesley, MA, and is in the process of deciding whether to build apartments, a combination of independent living and assisted living units for seniors, or perhaps even higher acuity facilities.

    The case describes several issues for the continuum of senior care alternatives for residents and developers. What motivates seniors to leave their homesteads for much smaller spaces? How can they afford to do so? What are the physical as well as operational challenges for operators when serving the different levels of acuity?

    The case also describes what zoning issues may be faced by developers who seek to build in attractive but challenging neighborhoods. Furthermore, how can a successful operator branch out into new businesses? When should the operator form joint ventures to help them achieve their strategic ends?

    Analytical tools discussed include: development metrics, impact of financing on projects, as well as analytical methods to forecast market demand.

    Keywords: Senior Living; Assisted Living; Independent Living; Property; Finance; Real Estate Industry; Boston; Massachusetts; United States;


    Wu, Charles F., and Joseph Beyer. "Making Room for the Baby Boom: Senior Living." Harvard Business School Case 215-003, July 2014. (Revised October 2014.) View Details
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