http://knowledge.wharton.upenn.edu/ Knowledge@Wharton is an online resource that offers the latest business insights, information, and research from a variety of sources. Content includes analysis of current business trends, interviews with industry leaders and faculty, articles based on the most recent business research, book reviews, conference and seminar reports, and links to other websites. en-us Copyright (c) 2012 The Wharton School of the University of Pennsylvania http://www.wharton.upenn.edu/faculty/goldstein_itay.jpg http://www.wharton.upenn.edu/faculty/ 125 45 Wharton Faculty Research Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2534&source=rss Financial institutions add to their woes during an economic downturn, experts say, by refusing to provide capital to worthy businesses because they fear other lenders will also cut back. In the end, banks create a credit shortage that does even more to extend the crisis and delay recovery. In a new paper, Wharton professor Itay Goldstein examines different approaches to halt an over-reaching credit crunch and concludes that the private and public sectors should work together to direct money toward viable businesses. Wed, 07 Jul 2010 14:14:17 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2466&source=rss Theory and common sense suggest that the marketplace imposes discipline on corporate managers. If top leadership performs poorly, the stock price will suffer and the company might be at risk of a takeover. But according to new Wharton research, other factors may mask the takeover "trigger" effect, making stock price a poor indicator of how the market views managers' performance. In addition, the research shows why corporate managers often seem willing, even eager, to publically complain that their firms are being eyed as takeover targets. Wed, 14 Apr 2010 11:36:17 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2447&source=rss Fear is growing that Greece may default on a massive pile of debt, creating a ripple effect of problems throughout Europe and beyond. Following pressure from the European Union and the European Central Bank, the Greek government on March 3 announced a new round of austerity measures that include spending cuts and tax increases which critics fear will harm Greece's economy. Meanwhile, Wall Street banks are facing scrutiny for the complex financial instruments they used to allegedly disguise the country's real debt. What caused Greece's debt problem to spin out of control? And what steps should it take to remedy the situation? Wharton finance professors Richard Herring and Itay Goldstein weigh in. Wed, 03 Mar 2010 15:50:03 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2352&source=rss The phrase "too big to fail" debuted during the financial crisis as a buzzword for mega banks and institutions that pushed the world economy -- and themselves -- to the brink of meltdown. Yet, they could not be allowed to fail because of the havoc this would wreak on the economy at large. With the worst of the crisis apparently over, attention now focuses on how to rein in the behemoths without encouraging even riskier behavior. Wharton faculty members offer their suggestions.   Wed, 14 Oct 2009 15:33:51 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2345&source=rss According to some estimates, high-frequency trading by investment banks, hedge funds and other players accounts for 60% to 70% of all trades in U.S. stocks, explaining the enormous increase in trading volume over the past few years. But critics of the practice worry that those profits are coming out of ordinary investors' pockets. Defenders, on the other hand, say high-frequency trading improves market liquidity, helping to insure there is always a buyer or seller available when one wants to trade. Wharton faculty and others weigh in. Wed, 30 Sep 2009 17:48:04 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2309&source=rss From California to Connecticut, the global recession has squeezed state finances, forcing many state governments to slash services, raise taxes or find unusually creative ways to close the gap. According to experts, the widespread budget shortfalls -- expected to continue through at least 2011 -- threaten to put a drag on the nation's economic recovery and undermine President Obama's stimulus plan. "The states aren't really playing the game like Obama hoped they would," says one Wharton finance professor. Wed, 05 Aug 2009 16:41:52 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2226&source=rss Securities prices are an important source of information that helps the government decide if it should intervene to rescue a struggling firm. But if investors expect government intervention, they might bid up the security's price to a level not warranted by the fundamentals. This "feedback loop" could prevent a company from getting help it desperately needs, according to research by Wharton professors Itay Goldstein and Philip Bond. They suggest a solution. Wed, 29 Apr 2009 14:19:24 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2196&source=rss The Obama administration aims to move $2 trillion in toxic assets off financial institutions' books by offering taxpayer-backed loans to hedge funds and other investors, trying to improve on earlier strategies that have failed to rekindle trading in securities backed by mortgages and other debt. The goal is to thaw the credit markets -- to get banks to lend money the economy needs to grow. Will it work? Experts have mixed views. Wed, 01 Apr 2009 17:13:39 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2195&source=rss On April 2, the Financial Accounting Standards Board is expected to vote on a proposal to relax a standard at the heart of the financial crisis -- mark-to-market accounting rules that require toxic assets to be carried on companies' books at fire-sale prices, based on recent trades of similar assets for far less than they would command in normal times. Many big banks say the crisis has been made worse by these rules. Not everyone agrees.   Wed, 01 Apr 2009 17:13:39 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2166&source=rss After a generation of increasingly relaxed regulation of the financial services sector, the very concept seems stunning: Nationalization of banks in Europe and the United States. But with many global banks still teetering on the brink of insolvency -- even after rescue efforts that have included multi-billion dollar infusions of capital and other forms of assistance -- a different view is emerging. A growing number of economists -- including, most recently, Alan Greenspan -- now argues that temporary government takeovers of the most deeply troubled institutions may be the only remaining solution. Wed, 18 Feb 2009 17:51:20 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=2133&source=rss When a mutual fund hits a bump in the road, will investors quickly bail out? The answer can be important to operators of open-end mutual funds, which allow investors to redeem their shares at the close of trading on any given day. When skittish stakeholders cash out, fund managers may have to conduct costly and unprofitable trades to quickly raise redemption capital. A new paper co-authored by Wharton finance professor Itay Goldstein examines patterns in fund redemptions and suggests ways to mitigate the impact. Wed, 07 Jan 2009 16:53:55 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1939&source=rss When Bear Stearns collapsed in March, some insiders argued it was wrong to blame the firm's risky bets on mortgaged-backed securities. They had another culprit: malevolent traders working together in the upside-down world of short sales -- making money by knocking down Bear's stock. There has, however, been little academic research to explain the forces at work. Now Wharton finance professor Itay Goldstein and a colleague have shed some light on the process in a paper titled, "Manipulation and the Allocational Role of Prices." Wed, 16 Apr 2008 16:43:25 EST