Mark L. Egan - Faculty & Research - Harvard Business School
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Mark L. Egan

Assistant Professor of Business Administration

Mark Egan is an assistant professor of finance in the Finance Unit, teaching Finance 1 to MBA students.

Professor Egan’s research concentrates on the intersection of corporate finance and industrial organization. His current research agenda explores how consumers access financial markets through banks and brokerage firms. His work has been cited in Bloomberg, The Financial Times, The New York Times, The Wall Street Journal, and the American Economic Review.

Professor Egan received a BA in economics from Middlebury College and a PhD in economics from the University of Chicago. Prior to beginning his doctoral studies, he worked in interest rate structuring at Barclays Capital in New York.


Journal Articles
  1. The Market for Financial Adviser Misconduct

    Mark Egan, Gregor Matvos and Amit Seru

    We construct a novel database containing the universe of financial advisers in the United States from 2005 to 2015, representing approximately 10% of employment of the finance and insurance sector. We provide the first large-scale study that documents the economy-wide extent of misconduct among financial advisers and the associated labor market consequences of misconduct. Seven percent of advisers have misconduct records, and this share reaches more than 15% at some of the largest advisory firms. Roughly one-third of advisers with misconduct are repeat offenders. Prior offenders are five times as likely to engage in new misconduct as the average financial adviser. Firms discipline misconduct—approximately half of financial advisers lose their jobs after misconduct. The labor market partially undoes firm-level discipline by rehiring such advisers. Firms that hire these advisers also have higher rates of prior misconduct themselves, suggesting "matching on misconduct." These firms are less desirable and offer lower compensation. We argue that heterogeneity in consumer sophistication could explain the prevalence and persistence of misconduct at such firms. Misconduct is concentrated at firms with retail customers and in counties with low education, elderly populations, and high incomes. Our findings are consistent with some firms "specializing" in misconduct and catering to unsophisticated consumers, while others use their clean reputation to attract sophisticated consumers.

    Keywords: Financial Advisors; Brokers; consumer finance; Financial Misconduct and Fraud; FINRA; Financial Institutions; Crime and Corruption; Organizational Culture; Personal Finance; Financial Services Industry;


    Egan, Mark, Gregor Matvos, and Amit Seru. "The Market for Financial Adviser Misconduct." Journal of Political Economy (forthcoming).  View Details
  2. Deposit Competition and Financial Fragility: Evidence from the U.S. Banking Sector

    Mark Egan, Ali Hortaçsu and Gregor Matvos

    We develop a structural empirical model of the US banking sector. Insured depositors and run-prone uninsured depositors choose between differentiated banks. Banks compete for deposits and endogenously default. The estimated demand for uninsured deposits declines with banks' financial distress, which is not the case for insured deposits. We calibrate the supply side of the model. The calibrated model possesses multiple equilibria with bank-run features, suggesting that banks can be very fragile. We use our model to analyze proposed bank regulations. For example, our results suggest that a capital requirement below 18 percent can lead to significant instability in the banking system.

    Keywords: Banks and Banking; Financial Condition; United States;


    Egan, Mark, Ali Hortaçsu, and Gregor Matvos. "Deposit Competition and Financial Fragility: Evidence from the U.S. Banking Sector." American Economic Review 107, no. 1 (January 2017): 169–216.  View Details
Working Papers
  1. The Cross Section of Bank Value

    Mark Egan, Stefan Lewellen and Adi Sunderam

    We study the determinants of value creation within U.S. commercial banks. We begin by constructing two new measures of bank productivity: one focused on deposit-taking productivity and one focused on asset productivity. We then use these measures to evaluate the cross-section of bank value. Both productivity measures are strongly value relevant, with variation in banks' deposit productivity responsible for the majority of variation in bank value. We also find evidence consistent with synergies between deposit-taking and lending activities: banks with high deposit productivity have high asset productivity, a relationship driven by the tendency of deposit-productive banks to hold illiquid loans. Our results suggest that both sides of the balance sheet contribute meaningfully to bank value creation, with the liability side playing a primary role.

    Keywords: banks and banking; productivity; Banks and Banking; Valuation; Performance Productivity; Value Creation;


    Egan, Mark, Stefan Lewellen, and Adi Sunderam. "The Cross Section of Bank Value." NBER Working Paper Series, No. 23291, March 2017.  View Details
  2. International Health Economics

    Mark Egan and Tomas J. Philipson

    Perhaps because health care is a local service sector, health economists have paid little attention to international linkages between domestic health care economies. However, the growth in domestic health care sectors is often attributed to medical innovations whose returns are earned worldwide. Because world returns drive innovation and innovation is central to spending growth, spending growth in a given country is thereby highly affected by health care economies and policies of other countries. This paper analyzes the unique positive and normative implications of these innovation-induced linkages across countries when governments centrally price health care. Providing world returns to medical innovation under such central pricing involves a public-goods problem; the taxation to fund reimbursements involves a private domestic cost with an international benefit of medical innovation. This has the direct normative implication that medical innovations have inefficiently low world returns. It also has the positive implication that reimbursements in one country depend negatively on those of others; reimbursements are "strategic substitutes" through free riding. Because reimbursements are strategic substitutes, world concentration of health care is a significant issue. A small European country has no access-innovation trade-off in its pricing; it will have low reimbursements because it does not affect world returns and sees the same innovations regardless of its reimbursement policy. The public-goods problem of innovation thereby implies that the United States, despite being the world's largest buyer, will pay the highest reimbursements. This problem also implies that free riding counteracts the standard positive impact of larger world markets on innovation when health care concentration falls. Indeed, currently, health care is highly concentrated; about half of world health care spending occurs in the United States, despite the fact that it makes up only about one-fifth of the world economy. We assess the effect that emerging markets will have on this concentration and thus world returns. We use pharmaceutical reimbursement data from 1996-2010 to provide IV estimates of the degree to which domestic reimbursements are strategic substitutes. We find that these estimates imply that world returns from innovation may actually fall from a growth in "market size" of BRICS countries as a result of increased free riding in non-BRICS countries. The overall analysis has important positive implications for spending patterns across countries as well as normative implications for evaluating domestic or regional health care reforms.

    Keywords: Health Care and Treatment; Innovation and Invention; Global Range; Economics;


    Egan, Mark, and Tomas J. Philipson. "International Health Economics." NBER Working Paper Series, No. 19280, August 2013.  View Details
  3. Non-Adherence in Health Care: A Positive and Normative Analysis

    Mark Egan and Tomas J. Philipson

    Non-adherence in health care results when a patient does not initiate or continue care that a provider has recommended. Previous research identifies non-adherence as a major source of waste in US health care, totaling approximately 2.3% of GDP, and have proposed a plethora of interventions to raise adherence. However, health economics provides little explicit analyses of the important dynamic demand behavior that drives non-adherence, and it is often casually attributed to uninformed patients. We argue that whereas providers may be more informed about the population-wide effects of treatments, patients are more informed about the individual specific value of treatment. We interpret a patient’s decision to adhere to a treatment regime as an optimal stopping problem in which patients learn the value of a treatment through treatment experience. We derive strong positive and normative implications resulting from interpreting non-adherence as an optimal stopping problem. Our positive analysis derives an “adherence survival function,” depicting the share of patients still on treatment as a function of time, and predicts how various observable factors alter adherence. Our normative analysis derives the efficiency effects of non-adherence and the conditions under which adherence is too high or low. We consider the efficiency implications of this analysis for common adherence interventions. We argue that personalized medicine is intimately linked to adherence issues. It replaces the learning through treatment experience with a diagnostic test, and thereby speeds up the learning process and cuts over-adherence and raises underadherence. We assess the quantitative implications of our analysis by calibrating the degree of over- and under-adherence for one of the largest US drug categories, cholesterol-reducing drugs. Contrary to frequent normative claims of under-adherence, our estimates suggest the efficiency loss from overadherence is over 80% larger than from under-adherence, even though only 43% of patients fully adhere.

    Keywords: Health Care and Treatment; Behavior; Economics; Analysis; Mathematical Methods;


    Egan, Mark, and Tomas J. Philipson. "Non-Adherence in Health Care: A Positive and Normative Analysis." NBER Working Paper Series, No. 20330, July 2014. (Previously titled, "Health Care Adherence and Personalized Medicine.")  View Details
  4. Adjusting National Accounting for Health: Is the Business Cycle Countercyclical?

    Mark Egan, Casey B. Mulligan and Tomas J. Philipson

    Many national accounts of economic output and prosperity, such as gross domestic product (GDP) or net domestic product (NDP), offer an incomplete picture by ignoring, for example, the value of leisure, home production, and the value of health. Previous discussed shortcomings of such accounts have focused on how unobserved dimensions affect GDP levels but not their cyclicality, which affects the measurement of the business cycle. This paper proposes a new methodology to measure economic fluctuations that incorporates monetized changes in health of the population in the United States and globally during the past 50 years. In particular, we incorporate in GDP the dollar value of mortality, treating it as depreciation in human capital analogous to how net domestic product (NDP) treats depreciation of physical capital. Because mortality tends to be pro‐cyclical, we find that adjusting for mortality reduces the measured deviations of GDP from trend during the past 50 years by about 30% both in the United States and internationally.

    Keywords: Health; Valuation; Accounting; United States;


    Egan, Mark, Casey B. Mulligan, and Tomas J. Philipson. "Adjusting National Accounting for Health: Is the Business Cycle Countercyclical?" NBER Working Paper Series, No. 19058, May 2013.  View Details
  5. When Harry Fired Sally: The Double Standard in Punishing Misconduct

    Mark Egan, Gregor Matvos and Amit Seru

    We examine gender discrimination in the financial advisory industry. We study a less salient mechanism for discrimination, firm discipline following missteps. There are substantial differences in the punishment of misconduct across genders. Although both female and male advisers are disciplined for misconduct, female advisers are punished more severely. Following an incidence of misconduct, female advisers are 20% more likely to lose their jobs and 30% less likely to find new jobs relative to male advisers. Females face harsher punishment despite engaging in less costly misconduct and despite a lower propensity towards repeat offenses. Relative to women, men are three times as likely to engage in misconduct, are twice as likely to be repeat offenders, and engage in misconduct that is 20% costlier. Evidence suggests that the observed behavior is not driven by productivity differences across advisers. Rather, we find supporting evidence for taste-based discrimination. For females, a disproportionate share of misconduct complaints is initiated by the firm, instead of customers or regulators. Moreover, there is significant heterogeneity among firms. Firms with a greater percentage of male executives/owners at a given branch tend to punish female advisers more severely following misconduct and also tend to hire fewer female advisers with past record of misconduct.

    Keywords: Financial Advisers; Brokers; Gender Discrimination; consumer finance; Financial Misconduct and Fraud; FINRA; Financial Institutions; Employees; Crime and Corruption; Gender; Prejudice and Bias; Outcome or Result; Personal Finance; Financial Services Industry;


    Egan, Mark, Gregor Matvos, and Amit Seru. "When Harry Fired Sally: The Double Standard in Punishing Misconduct." NBER Working Paper Series, No. 23242, March 2017.  View Details
  6. Brokers vs. Retail Investors: Conflicting Interests and Dominated Products

    Mark Egan

    I study how brokers distort household investment decisions. Using a novel convertible bond data set, I find that consumers frequently purchase dominated bonds – cheap and expensive of otherwise identical bonds exist in the market at the same time. The empirical evidence suggests that broker incentives are responsible for the inferior investments as brokers earn a 1.12% higher fee for selling the dominated bond on average. I develop and estimate a model that rationalizes the behavior of brokers and consumers. In the model, brokers direct the investment decisions of consumers and price discriminate across consumers based on the consumer’s level of financial sophistication in order to maximize brokerage commissions. I use the model to investigate the proposed Dodd Frank Act and Department of Labor regulations in which brokers may be held to a fiduciary standard. Aligning broker incentives with those of consumers’ could increase consumer risk-adjusted returns by over 2 percentage points and increase total surplus by 25%.]

    Keywords: Brokers; Fiduciary Standard; consumer finance; structured products; Personal Finance; Investment; Decision Making; Governance Controls;


    Egan, Mark. "Brokers vs. Retail Investors: Conflicting Interests and Dominated Products." Working Paper, February 2017. (Revise and resubmit at the Journal of Finance.)  View Details