!

Ulf Axelson
Research Fellow

E-mail: ulf.axelson@sifr.org
Phone: +46-8-728 51 26
Fax: +46-8-728 51 30

Curriculum Vitae (PDF-file).
Short Biography
Selected Publications
Working Papers
Work in Progress


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.

Professor Axelson's research lies within the fields of private equity, financial innovation and security design, corporate finance, auction theory, and financial intermediation. His research has been published in leading finance journals such as the Journal of Finance and the Review of Financial Studies, and has been widely presented at leading universities as well as numerous conferences. His research was awarded the Henderson Award for Excellence in Economic Theory in 2000.

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