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. Fresno’s Social Impact Bond for Asthma

    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
  2. Rick's Dilemma

    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 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, Siddharth Yog, and Ben Eppler. "Rick's Dilemma." Harvard Business School Case 215-006, August 2014. View Details
  3. Husk Power

    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 August 2014.) View Details
  4. Making Room for the Baby Boom: Senior Living

    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. View Details
  5. 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;

  6. Patent Trolls: Evidence from Targeted Firms

    We provide theoretical and empirical evidence on the evolution and impact of non-practicing entities (NPEs) in the intellectual property space. Heterogeneity in innovation, given a cost of commercialization, results in NPEs that choose to act as "patent trolls" that chase operating firms' innovations even if those innovations are not clearly infringing on the NPEs' patents. We support these predictions using a novel, large dataset of patents targeted by NPEs. We show that NPEs on average target firms that are flush with cash (or have just had large positive cash shocks). Furthermore, NPEs target firm profits arising from exogenous cash shocks unrelated to the allegedly infringing patents. We next show that NPEs target firms irrespective of the closeness of those firms' patents to the NPEs', and that NPEs typically target firms that are busy with other (non-IP related) lawsuits or are likely to settle. Lastly, we show that NPE litigation has a negative real impact on the future innovative activity of targeted firms.

    Keywords: Patent trolls; NPEs; innovation; patents; Patents; Ethics; Lawsuits and Litigation; Innovation and Invention; Corporate Finance;


    Cohen, Lauren, Umit G. Gurun, and Scott Duke Kominers. "Patent Trolls: Evidence from Targeted Firms." Harvard Business School Working Paper, No. 15-002, July 2014. (Revised August 2014.) View Details
  7. Financial Policy at Apple, 2013 (A)

    By the end of 2013, Apple had $137 billion dollars in cash and marketable securities. This case explores how companies can generate such large amounts of cash and how and if they should distribute it to shareholders, especially in the face of shareholder pressure. In the process, students are asked to undertake fundamental financial analyses, including ratio analysis, a financial forecast, and a cash distribution analysis.

    Keywords: Apple; Steve Jobs; forecast; Forecasting; Forecasting and Prediction; shareholder activism; share repurchase; dividends; Financial ratios; preferred shares; cash distribution; Corporate Finance; Borrowing and Debt; Financial Management; Financial Strategy; Technology Industry; Consumer Products Industry; United States; Republic of Ireland;


    Desai, Mihir A., and Elizabeth A. Meyer. "Financial Policy at Apple, 2013 (A)." Harvard Business School Case 214-085, June 2014. View Details
  8. Southeastern Asset Management Challenges Buyout at Dell

    In late 2012, Michael Dell wants to take Dell Inc., the company he founded, private. Mr. Dell believes that the successful company's transformation from a personal computer (PC) manufacturer to an enterprise solutions and services provider (ESS) is dependent on going private without the short-term results scrutiny public companies face. He and a private equity firm, Silver Lake Partners, have made an offer for the company, which Dell Inc.'s board has accepted. The deal requires the vote of a majority of shareholders. Southeastern Asset Management, an investment firm, and Dell Inc.'s second largest shareholder behind Mr. Dell strongly oppose the deal because the offer is well below what Southeastern believes is Dell Inc.'s intrinsic value. Southeastern, along with activist investor Carl Icahn, wage a campaign to defeat the go-private deal and propose a leveraged recapitalization as an alternative. On several occasions it appears that the deal will be voted down by shareholders, but rule changes made by Dell Inc.'s Board eventually pave the way for Mr. Dell to take the eponymous company private—for a price only slightly higher than the original bid. The case describes the reasons why Mr. Dell wants to take Dell Inc. private, why Southeastern and Icahn oppose the deal, the specifics of both the Dell/Silver Lake bid and of Southeastern's/Icahn's leveraged recapitalization proposals, and the events that took place.

    Keywords: Leveraged Buyout Transaction; leveraged buyouts; leveraged recapitalization; management buyout; Dell, Inc.; hedge fund; corporate accountability; corporate governance; corporate governance theory; valuation; valuation ratios; valuation methodologies; board of directors; boards of directors; Carl Icahn; computer industry; computer services industries; proxy contest; proxy battles; proxy fight; proxy advisor; Financial Accounting; financial analysis; Financial ratios; corporate finance; finance; Corporate Accountability; Corporate Governance; Corporate Finance; Computer Industry; United States;


    Healy, Paul, Suraj Srinivasan, and Aldo Sesia. "Southeastern Asset Management Challenges Buyout at Dell." Harvard Business School Case 114-015, June 2014. (Revised August 2014.) View Details
  9. 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;


    Vallee, Boris, and Claire Celerier. "Are Bankers Worth Their Pay? Evidence from a Talent Measure." Working Paper. View Details
  10. Comparing the Cash Policies of Public and Private Firms

    I document that public U.S. firms hold twice as much cash as large privately held firms, a surprising finding that is robust to three alternative identification strategies: matching, within-firm variation, and instrumental variable. Public firms' greater access to capital accounts for about one-quarter of the difference. The remainder can be explained by differences in the extent to which public and private firms engage in market timing in response to misvaluation shocks. I show that the risk of misvaluation induces public firms to raise capital and accumulate cash reserves when they perceive their equity to be overvalued, resulting in greater demand for precautionary cash holdings.

    Keywords: finance; equity; Private companies; Corporate cash hoarding; Precautionary motives; Market timing; Share issuance; IPOs; Private Ownership; Cash; Market Timing; Corporate Finance; Public Ownership; United States;


    Farre-Mensa, Joan. "Comparing the Cash Policies of Public and Private Firms." Harvard Business School Working Paper, No. 14-095, April 2014. View Details
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