David Thesmar, Professor of Finance, teaches corporate Finance in the MIF. David is a member of the French Council of Economic Advisors. He is also an associate editor for the Journal of Finance.
- Can you tell us a little about your background?
After studying at the Ecole Polytechnique and ENSAE, I joined the French National Statistics Institute as a researcher and teacher, and worked on macroeconomic forecasts as well. I joined HEC Paris in September 2005, working for the Economics and Finance Department where I teach mainly corporate finance.
- In 2007, the Cercle des Economistes and Le Monde awarded you the prize for the best young French economist. Can you give us a brief insight on the work that led to the award?
Since my thesis, I have focused on corporate organization. Why are hierarchies flatter in modern companies? Why do tasks tend to be less clearly defined? Why have employees been given greater autonomy? Why the upsurge in outsourcing? Gradually, my research has turned towards the financial determinants of work organization: how does organization in a company belonging to an investment fund differ from that in a family firm? In what ways does shareholder pressure modify corporate governance?
- All MIF students go through two core courses in corporate finance. Why do you feel it is important for a future trader or asset manager to have sound knowledge of corporate finance?
Securities traded on markets are issued by firms. Without a clear view of the tradeoff faced by firms in their financing decision, it is hard to have a sense of their actual value. For instance, when a firm borrows from a bank, its stock price may increase, because of tax savings, or decrease, because of risk. When a firm spins off a major asset, it may be good or bad news for stockholders. When a firm announces an equity issue or a hostile takeover, you need to know if you should buy or sell its stock. Whether you invest for the short run or for the long term, you need to be comfortable with this type of reasoning. This is exactly what a first course in Corporate Finance focuses on: the impact of a firm’s financing choices on market value.