Upcoming FTG Events
10
Dec
3rd Asian FTG Conference
From: December 10, 2026 - To: December 11, 2026
Hong Kong University
The 3rd Annual Finance Theory Group Winter Conference will be held at The University of Hong Kong on...
07
May
36th Meeting at UT Dallas (Spring 2027)
01
Jun
Summer FTG Conference 2027
Featured Papers
Banks face a dual mandate of raising cheap deposits while avoiding liquidity risk. We propose a novel mechanism whereby banks use portfolio opacity to meet this objective. Specifically, banks choose opaque portfolios to secure cheap long-term funding while trading off insolvency and illiquidity. We show that while opacity lowers deposit...
We study the determinants of asset market fragmentation in a model with strategic investors that disagree about the value of an asset. Investors’ choices determine the market structure. Fragmented markets are supported in equilibrium when disagreement between investors is low. In this case, investors take the same side of the...
Regulating externalities is a major challenge when economic agents face uncertainty and disagreement. Traditional Pigouvian and Coasean approaches often struggle because they require either precise knowledge of externality costs or frictionless bargaining. We propose an "uncertainty-based regulation" (UBR) mechanism that leverages both uncertainty and firms' heterogeneous information to achieve socially...
Finance Theory Insights
Finance Theory Insights
Issue 10 (September 2026)
Benefits of Coordination and Consequences of Coordination Failures
One of the central themes in corporate finance concerns the benefits of coordination and the consequences of coordination failures. Such trade-offs influence many important aspects of corporate decision-making, such as the failure of firms, incentives to engage in activism, and the compensation of senior executives. A key channel through which they operate is the underlying contractual setting confronting firms.
For example, two of the papers in this issue address trade-offs involving the failure of firms. “Filing for Bankruptcy Early Can Keep a Firm Alive Longer” highlights the incentive for creditors to run and how automatic stay provisions after a bankruptcy filing, as well as clawback provisions, influence decisions prior to bankruptcy. The automatic stay increases the post-bankruptcy payoff to discourage running prior to bankruptcy, while clawback provisions also weaken the incentive to run. Hence, bankruptcy rules can affect the timing of bankruptcy. “The Hidden Logic of Letting Firms Fail” focuses on the fire-sale externality among banks and how reorganization affects others. Whether one should encourage liquidation or, alternatively, discourage it—as illustrated by the eviction moratorium that arose during COVID-19—depends upon the health of the banks. There can be competing externalities in a crisis due to differences in bank collateral constraints. Under some conditions, liquidation should be subsidized, while under others it should be taxed.
“Leader-Follower Dynamics in Shareholder Activism” examines situations in which there is “wolf pack activism,” in which blockholders coordinate actions tacitly. A larger stake held by one activist can incentivize other holders to accumulate additional shares, even without explicit coordination. Finally, “Too Much, Too Soon, for Too Long: Why Competition Alone Cannot Fix CEO Pay” examines how the market for executive compensation can systematically produce overcompensation due to spillovers related to punishment in the marketplace. This suggests a rationale for noncompete clauses that restrict an executive’s outside option.
News
September 1, 2026
10th Issue of FT Insights
We are pleased to announce that the 10th Issue of FT Insights is now available. This issue explores...
May 9, 2026
2026 Best JMP Prize Winners
We are pleased to announce the recipients of the 2026 FTG Best Theory Job Market Paper Prize.Winner: Hanjoon...
April 14, 2026
2026 New Members
The FTG is pleased to welcome our new members:Alex Maciocco (UC Irvine → Indiana), Alexander Ober (Rice), Elu...