http://hirth.dk (last change: November 20, 2011)

Stefan Hirth

Associate Professor
Dr. rer. pol., Dipl.-Wi.-Ing.

Aarhus University
Business and Social Sciences
Department of Economics and Business
Fuglesangs Allé 4
DK-8210 Aarhus V
+45 89 48 63 65
official web: au.dk/en/stefanh@asb.dk
e-mail: shirth [at] econ.au.dk

AREAS OF INTEREST

Research: Corporate Finance, Real Options, Capital Structure, Strategic Interaction, Credit Rating Agencies

Teaching: Portfolio Theory, Real Options, Corporate Finance, Credit Risk, Investments

EDUCATION

Universität Karlsruhe (TH)	Finance	2002-2007	Dr. rer. pol. (2007)
University of Massachusetts, Amherst, MA	Economics	2000-2001	Ph.D. level, non-degree
Universität Karlsruhe (TH)	Business Engineering	1997-2002	Dipl.-Wi.-Ing. (2002)

DISSERTATION

“Liquide Mittel und Investitionsentscheidungen - Ein optionstheoretischer Ansatz.”
(“Liquid Funds and Investment Decisions - An Option Theoretical Approach.”)
Advisor: Prof. Marliese Uhrig-Homburg, Karlsruhe Institute of Technology

DIPLOMA THESIS

“Das Nutzerverhalten in Dynamischen Fahrgemeinschaften aus der Sicht der Evolutionären Spieltheorie.”
(“Behavior of Dynamic Carpool Service Users Seen From Evolutionary Game Theory Perspective.”)
Advisor: Prof. Werner Rothengatter, Karlsruhe Institute of Technology

EXPERIENCE

Academic:

Aarhus University, Business and Social Sciences	Associate Professor	2010-today
Columbia University , New York, USA	Visiting Scholar	2011
AUT University, Auckland, New Zealand	Visiting Researcher	2008
Aarhus University, Business and Social Sciences	Assistant Professor	2007-2010
Universität Karlsruhe (TH)	Research & Teaching Assistant	2002-2007
United Asia Learning Resource Center, University of Massachusetts, Amherst, MA	Tutor (Statistics, Economics, Computer Science)	2000-2001
Universität Karlsruhe (TH)	Tutor (Statistics, Economics)	1998-2000
Ellental High School, Bietigheim, Germany	Stand-In Teacher (Latin Workgroup)	1995

Industry:

Daimler AG, Sindelfingen, Germany	Intern & Diploma Thesis (Game Theory)	2001-2002
Commerzbank AG, Frankfurt, Germany	Intern (Interest Rate Derivatives)	2000

TEACHING

Courses:

Corporate Finance I (MSc): Fall 2011, Fall 2010, Fall 2009, Aarhus University, Business and Social Sciences
Real Options and Strategic Interaction (MSc): Fall 2011, Fall 2010, Fall 2008, Spring 2008, Aarhus University, Business and Social Sciences
Asset Pricing I (MSc): Fall 2008, Fall 2007, Aarhus University, Business and Social Sciences
Credit Risk (Diploma): Summer 2007, Summer 2006, Universität Karlsruhe (TH) (Teaching Assistant)
Capital Market Theory (Diploma): Winter 2004/05, Winter 2003/04, Winter 2002/03, Universität Karlsruhe (TH) (Teaching Assistant)

Supervision:

Various MSc Theses, BSc Theses, Diploma Theses, Seminars

PUBLICATIONS

Articles in peer-reviewed journals:

“Financing Constraints, Cash-Flow Risk, and Corporate Investment”
Co-Authored with Marc Viswanatha
Journal of Corporate Finance, Volume 17, Issue 5, December 2011, Pages 1496-1509
Available at ScienceDirect

Abstract:
Using an analytically tractable two-period model of a financially constrained firm, we derive an investment threshold that is U-shaped in cash holdings. We show analytically the relevant trade-offs leading to the U-shape: the firm balances financing costs for present and future investment, respectively. Our main argument is that financing costs today are more important than the risk of future financing costs. The empirically testable implications are that low-cash firms facing financing costs today are more reluctant to invest if they have less cash, or if their future cash flows are more risky. On the other hand, cash-rich firms facing no financing costs today invest in less favorable projects (i.e., forgo their real option to wait) if they have less cash, or if their future cash flows are more risky. The magnitude of these effects is amplified by the degree of market frictions that the firms are facing.
“Investment Timing When External Financing Is Costly”
Co-Authored with Marliese Uhrig-Homburg
Journal of Business Finance & Accounting, Volume 37, Issue 7-8, September/October 2010, Pages 929-949
Available at Wiley InterScience

Abstract:
This paper analyzes the investment timing of firms facing two dimensions of financing constraints: Liquidity constraints and capital market frictions inducing financing costs. We show that liquidity constraints are not sufficient to explain voluntary investment delay. However, when additionally considering financing costs, we can explain both voluntary delay and acceleration of investment. More precisely, we find that investment thresholds are U-shaped in liquid funds. For high-liquidity firms, investment thresholds are decreasing (i.e. accelerated investment takes place) in either dimension of financing constraint. In contrast, investment thresholds are increasing (i.e. investment is further delayed) in either form of financing constraint for low-liquidity firms. For intermediate levels of liquidity, investment thresholds are U-shaped in market frictions.
“Investment Timing, Liquidity, and Agency Costs of Debt”
Co-Authored with Marliese Uhrig-Homburg
Journal of Corporate Finance, Volume 16, Issue 2, April 2010, Pages 243-258
Available at ScienceDirect, or download author-created version

Abstract:
This paper examines the effect of debt and liquidity on corporate investment in a continuous-time framework. We show that stockholder-bondholder agency conflicts cause investment thresholds to be U-shaped in leverage and decreasing in liquidity. In the absence of tax effects, we derive the optimal level of liquid funds that eliminates agency costs by implementing the first best investment policy for a given capital structure. In a second step we generalize the framework by introducing a tax advantage of debt, and we show that an interior solution for liquidity and capital structure optimally trades off tax benefits and agency costs of debt.

Monographies:

“Liquide Mittel und Investitionsentscheidungen - Ein optionstheoretischer Ansatz”
(“Liquid Funds and Investment Decisions - An Option Theory Approach”)
Beiträge zur betriebswirtschaftlichen Forschung 118, Gabler Verlag, Wiesbaden 2008

Contributions to books:

Jonathan Berk and Peter DeMarzo, “Corporate Finance”, Global Edition, 2010
Provided three data cases, joint with Pernille Jessen and Henrik Nørholm

WORKING PAPERS

“Beyond Duopoly: The Credit Ratings Game Revisited”
November 2011
Available at SSRN

Abstract:
I analyze credit rating agencies and competition. A shortcoming of existing models is that they only consider competition in duopoly, although the U.S. market consists of three major players, and even ten organizations that are designated as Nationally Recognized Statistical Rating Organizations. I develop a framework using Evolutionary Game Theory to analyze the interaction of credit rating agencies in a competitive market with more than two agencies. I show that increasing competition can lead to significant changes in market structures and outcomes for any arbitrary current market size, for example when one new agency enters a market currently consisting of two, three, or ten agencies. Furthermore, honest rating behavior can indeed be achieved as a result of high competition. Alternatively, it can be implemented by regulatory measures like abolishing the 'issuer pays' model or by a centralized monitoring of ratings quality.
“Asset Liquidity, Corporate Investment, and Endogeneous Financing Costs”
Co-Authored with Christian Riis Flor, July 2011

Abstract:
The liquidity of real and financial assets affects corporate investment. We study the trade-off between underinvestment costs and asset liquidation costs, and we show that the sensitivity of investment to the firm's liquid funds can be negative. The magnitude of the sensitivity is determined by the firm's real asset liquidity. Investment is less sensitive to liquid funds for firms with a higher degree of asset redeployability. Both the usage of debt financing and the sign of the sensitivity of investment to the firm's liquid funds depend on real and financial asset liquidity in a non-monotonic way.

RESEARCH PRESENTATIONS

“Beyond Duopoly: The Credit Ratings Game Revisited” (previous versions entitled “The Credit Ratings Game - revisited”):

Symposium on Finance, Banking, and Insurance, Karlsruhe, Germany 2011 (scheduled)
Globalization: Strategies and Effects, Kolding, Denmark 2011
10th International Conference on Credit Risk Evaluation, Venice, Italy 2011
European Summer Symposium in Financial Markets, Gerzensee, Switzerland 2011
Invited Guest Lecture, Karlsruhe Institute of Technology, Karlsruhe, Germany 2011

“Financing Constraints, Cash-Flow Risk, and Corporate Investment” (previous versions entitled “The Non-Monotonic Effect of Financing Constraints on Investment Timing”):

Midwest Finance Association, Chicago, IL 2011
Portuguese Finance Network, Ponta Delgada, Portugal 2010
D-CAF Members Meeting, Elsinore, Denmark 2010
Workshop Financial Markets & Risk, Universität Innsbruck, Obergurgl, Austria 2010
Swiss Society for Financial Market Research, Zurich, Switzerland 2010
Campus for Finance, Vallendar, Germany 2010
European Conference on Operational Research, Bonn, Germany 2009

“Asset Liquidity, Corporate Investment, and Endogeneous Financing Costs” (previous versions entitled “Financing Investment: The Cost Trade-Off”):

German Finance Association, Hamburg, Germany 2010
Portuguese Finance Network, Ponta Delgada, Portugal 2010
Swiss Society for Financial Market Research, Zurich, Switzerland 2010
Invited Guest Lecture, Frankfurt School of Finance & Management, Frankfurt, Germany 2010
Eastern Finance Association, Washington, DC 2009 (presented by Christian Riis Flor)
Workshop Credit Risk Management, Universität Innsbruck, Obergurgl, Austria 2009
Midwest Finance Association, Chicago, IL 2009
Campus for Finance, Vallendar, Germany 2009
Australasian Finance & Banking Conference, Sydney, Australia 2008
Invited Guest Lecture, AUT University, Auckland, New Zealand 2008
Invited Guest Lecture, University of Otago, Dunedin, New Zealand 2008
Invited Guest Lecture, Victoria University of Wellington, New Zealand 2008
D-CAF Members Meeting, Ebeltoft, Denmark 2008

“Investment Timing, Liquidity, and Agency Costs of Debt” (previous versions entitled “Investment Timing and Endogenous Default”):

European Winter Finance Summit, Hemsedal, Norway 2008
Australasian Finance & Banking Conference, Sydney, Australia 2007
Quantitative Methods in Finance Conference (QMF), Sydney, Australia 2007
European Financial Management Association, Vienna, Austria 2007
Verband der Hochschullehrer für Betriebswirtschaft e.V. (VHB), Paderborn, Germany 2007
Invited Guest Lecture, Swiss Banking Institute (ISB), University of Zurich, Zurich, Switzerland 2007
Invited Guest Lecture, Aarhus University, Business and Social Sciences, Aarhus, Denmark 2007
Invited Guest Lecture, Universität Konstanz, Constance, Germany 2007 (presented by Marliese Uhrig-Homburg)
Campus for Finance, Vallendar, Germany 2007
Financial Management Association Annual Meeting, Salt Lake City, UT 2006
German Finance Association, Oestrich-Winkel, Germany 2006
Financial Management Association European Conference, Stockholm, Sweden 2006
Swiss Society for Financial Market Research, Zurich, Switzerland 2006
Workshop Credit Risk Management, Universität Innsbruck, Obergurgl, Austria 2005
Operations Research Conference, Bremen, Germany 2005

“Investment Timing When External Financing Is Costly”:

IFSAM VIIIth world congress, Berlin, Germany 2006
Invited Guest Lecture, University of Southern Denmark, Odense, Denmark 2006
Symposium on Finance, Banking, and Insurance, Karlsruhe, Germany 2005
Verein für Socialpolitik (German Economic Association), Bonn, Germany 2005
German Finance Association, Augsburg, Germany 2005
Financial Management Association European Conference, Siena, Italy 2005
Swiss Society for Financial Market Research, Zurich, Switzerland 2005
Campus for Finance, Vallendar, Germany 2005
Doctoral Student Seminar, German Finance Association, Tübingen, Germany 2004
Operations Research Conference, Tilburg, Netherlands 2004

OTHER RELEVANT ATTENDANCES

PhD course on Credit Risk and Bubbles , Aarhus, 2009 (Prof. R. Jarrow)
PhD course on Corporate Finance, Aarhus, 2008 (Prof. J. Ritter)
Meetings of Nobel Laureates in Lindau, Germany 2006 (2nd Lindau Meeting in Economic Sciences, as fellow of Audi AG)
Spring School in Finance, Bologna, Italy 2006 (Prof. B. Dupire, Prof. D. Lamberton)

ORGANIZATION OF PHD COURSES

PhD course on Real Options, Aarhus, 2011 (Prof. L. Trigeorgis)
PhD course on Advanced Academic Writing, Aarhus, 2010 (Dr. E. Huizingh)

REFEREE ACTIVITIES

Journals:

Conferences:

SFS Finance Cavalcade, University of Virginia, USA 2012
Campus for Finance, Vallendar, Germany 2012
Symposium on Finance, Banking, and Insurance, Karlsruhe, Germany 2011
German Finance Association, Regensburg, Germany 2011
Campus for Finance, Vallendar, Germany 2011
German Finance Association, Hamburg, Germany 2010
Symposium on Finance, Banking, and Insurance, Karlsruhe, Germany 2008
Swiss Society for Financial Market Research, Zurich, Switzerland 2007

COMMITTEES AND ADMINISTRATION

Member of Departmental Forum, Aarhus University, Business and Social Sciences , 2011-today
Head of PhD committee for Pernille Jessen, Aarhus University, Business and Social Sciences , Oral Defense January 21, 2011

PROFESSIONAL MEMBERSHIPS

HONORS AND GRANTS

Research grant for “The Credit Ratings Game - revisited” (10.000 €)	Europlace Institute of Finance (EIF)	2011
Travel grant for research visit to Columbia University, New York, USA (20.000 DKK)	Otto Mønsteds Fond	2011
Dr. rer. pol. with distinction	Universität Karlsruhe (TH)	2007
2nd prize for co-advised student paper (20.000€)	Postbank Finance Award 2006/07	2007
Graduate with distinction	Universität Karlsruhe (TH)	2002
Outstanding service award	United Asia Learning Resource Center, University of Massachusetts, Amherst, MA	2001

REFERENCES

Prof. Nicole Branger
Lehrstuhl für BWL, insbesondere Derivate und Financial Engineering
Universität Münster, Universitätsstraße 14-16, 48143 Münster, Germany
+49 (251) 83-22033, nicole.branger [at] wiwi.uni-muenster.de
Prof. Peter Løchte Jørgensen
Aarhus University, Business and Social Sciences, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
+45 89 48 66 91, plj [at] asb.dk
Prof. Marliese Uhrig-Homburg
Chair of Financial Engineering and Derivatives
Karlsruhe Institute of Technology, Kaiserstraße 12, 76131 Karlsruhe, Germany
+49 (721) 608-48183, derivate [at] fbv.kit.edu