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Ulf Axelson
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Short Biography
Ulf Axelson joined the
Swedish Institute of Financial Research (SIFR) in 2004. He is an Assistant
Professor of Finance at the Stockholm School of Economics since 2006.
Professor Axelson was previously an Assistant Professor of Finance at the
Graduate School of Business of the University of Chicago. He received his
Ph.D. in Financial Economics from Carnegie Mellon University and holds an MBA
(civilekonom) from the Stockholm School of Economics. At the Stockholm School
of Economics, Dr. Axelson is currently teaching two MBA courses in corporate
finance, “Corporate Finance” and “Cases in Corporate
Finance”, and was awarded the “Best Teacher” award in 2006.
He also teaches corporate finance in the executive education program at the
SSE. Between 1999 and 2004, he was a faculty member at the University of
Chicago GSB, where he taught MBA courses in corporate finance. Dr. Axelson is also an
independent board member of Consortum Capital Investments AB and of the
Foundation for Lithuanian-Swedish Relations. Back to top
Selected Publications
“Security
Design With Investor Private Information,” Journal of Finance 62:6, December 2007,
pp. 2587-2632
Abstract: I study the security design
problem of a firm when investors rather than managers have private information about
the firm. I find that it is often optimal to issue information-sensitive
securities such as equity. The “folklore proposition of debt”
from traditional signaling models only goes through if the firm can vary the
face value of debt with investor demand. When the firm has several assets,
debt backed by a pool of assets is optimal when the degree of competition
among investors is low, while equity backed by individual assets is optimal
when competition is high.
“Liquidity
and Manipulation of Executive Compensation Schemes,” with Sandeep Baliga, forthcoming, Review
of Financial Studies
Abstract: Compensation contracts have been criticized for
encouraging managers to manipulate information. This includes bonus schemes
that encourage earnings smoothing, and option packages that allow managers to
cash out early when the firm is overvalued. We show that the intransparency
induced by these contract features is critical for giving long-term
incentives. Lack of transparency makes it harder for the owner to engage in
ex post optimal but ex ante inefficient liquidity provision to the manager.
For the same reason, it is often optimal to “pay for luck” -
i.e., tie long-term compensation to variables that the manager has no
influence over, but may have private information about, such as future
profitability of the whole industry. “Why are
Buyouts Levered: The Financial Structure of Private Equity Firms,”
with Per Strömberg and Michael
Weisbach, accepted with minor revisions, Journal of Finance
Abstract: Private equity funds have become important actors in the economy, yet
there has been little analysis explaining their financial structure. We
present a model where the financial structure minimizes agency conflicts
between fund managers and investors. Relative to financing each deal
separately, raising a fund where the manager receives a fraction of aggregate
excess returns improves incentives to avoid bad investments. Efficiency is
further improved by requiring funds to also use deal-by-deal debt financing,
which becomes unavailable in states where internal discipline fails.
Nevertheless, investment is overly cyclical, and investments in bad states
outperform investments in good states.
Technical
Appendix to “Why are Buyouts Levered: The Financial Structure of
Private Equity Firms”
Back to top
Working Papers
“Leverage
and Pricing in Buyouts: An Empirical Analysis”
Abstract: This paper provides an empirical analysis of the financial structure
of large recent buyouts. We collect detailed information of the financings of
153 large buyouts (averaging over $1 billion in enterprise value). We
document the manner in which these important transactions are financed.
Buyout leverage is cross-sectionally unrelated to the leverage of matched
public firms, and is largely driven by other factors than what explains
leverage in public firms. In particular, the economy-wide cost of borrowing
seems to drive leverage. Prices paid in buyouts are related to the prices
observed for matched firms in the public market, but are also strongly
affected by the economy-wide cost of borrowing. These results are consistent
with a view in which the availability of financing impacts booms and busts in
the private equity market. “Bundling,
Rationing, and Dispersion Strategies in Private and Common Value
Auctions”
Abstract: I study optimal selling strategies by a multi-product seller who is
confined to using a standard auction format but has leeway in bundling
products and choosing aggregate and individual quantities offered to buyers.
I show how decisions of bundling, rationing, and dispersing the allocation
depend on whether the product is of private or common value, how high demand
is relative to supply, and what auction mechanism the seller uses. “The
Dynamics of Financial Innovation and the Industrial Organization of
Risk-sharing Markets”
Abstract: This paper develops a theory of the opening and dynamic development of
a futures market with competing exchanges. The optimal contract design
involves a trade-off between the hedging potential of a contract and
it’s degree of substitution with competing contracts. As design costs
go down slowly, more exchanges enter, but if costs go down fast or reach
zero, markets consolidate (fewer number of exchanges). I develop implications
for how the hedging potential and cross-correlation between contracts develop
over time. I extend the model to a case where demand is uncertain before
trade has been observed, and perform comparative statics on the social
efficiency of market opening. For markets with equivalent expected surplus,
the propensity of markets to open are negatively related to the probability
of further entry and the ex ante uncertainty, and positively related to the
time lag between innovations. Back to top
Work in Progress
(coming soon!)
“Investment Bankers,” with Philip Bond
“Optimal Mechanisms and Security Design in
Common Value Auctions”
Back to top
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