Martin C. Schmalz

Associate Professor of Finance, Saïd Business School, University of Oxford, UK

I am a financial economist interested in how finance interacts with other fields of economics, including industrial organization, labor economics, behavioral economics, monetary economics, and micro-economic theory. Recent projects, categorized below, examine how

(A1) financial constraints, transactions costs, monetary conditions, and heterogeneous beliefs,

(A2) imperfect competition, and

(A3) political economy considerations

affect corporate financial choices, entrepreneurship, firm strategy and market outcomes, as well as central bank behavior.

I also care about how non-standard beliefs (B1) and preferences (B2) affect individual investor behavior and asset prices.

I teach Big Data, Artificial Intelligence, and Machine Learning applications in finance.


PhD, Economics, Princeton University, USA

Dipl.-Ing., Mechanical Engineering, Universität Stuttgart, Germany

Academic Appointments

    • University of Oxford (2019 - present)
      • Saïd Business School: Associate Professor of Finance (with tenure)
      • Nuffield College: Associate Member
      • Oxford-Man Institute: Associate Member
    • University of Michigan (2012 - 2018)
      • Stephen M. Ross School of Business
        • NBD Bancorp Assistant Professor in Business Administration
        • Harry H. Jones Research Scholar
        • Assistant Professor of Finance
      • Center on Finance, Law, and Policy: Faculty Affiliate
    • CEPR (London, UK): Research Affiliate
    • ECGI (Brussels, Belgium): Research Member
    • CESifo (München, Germany): Research Affiliate

Peer-Reviewed Publications (in chronological order, labeled by topic)

  1. (B2) Anxiety in the Face of Risk, with Thomas Eisenbach, Journal of Financial Economics, 121(2), 2016, pp. 414-426.
    • Describes the behavior of an agent that is more risk-averse for imminent than for distant risks.
  2. (A1) Can Changes in the Cost of Carry Explain the Dynamics of Corporate Cash Holdings? (w/ Azar & J-F Kagy), Review of Financial Studies, 29(8), 2016, pp. 2194-2240.
    • Explores whether monetary conditions can explain corporate liquid asset holdings in the U.S. and abroad.
  3. (A1) Housing Collateral and Entrepreneurship, with David Sraer & David Thesmar, Journal of Finance, 72(1), 2017, pp. 99-132. Brattle Group Distinguished Paper Prize.
    • Shows that collateral constraints restrict entrepreneurial activity.
  4. (B1) Fund Flows and Market States, with Francesco Franzoni, Review of Financial Studies, 30(8), 2017, pp. 2621-2673.
    • Bayesian investors reallocate more capital to outperforming mutual funds when the market moves sideways, compared to times with more extreme factor realizations.
  5. (A2) Anticompetitive Effects of Common Ownership, with José Azar and Isabel Tecu, Journal of Finance, 73(4), 2018, pp. 1513-1565. Internet Appendix. Replication Package.
    • Provides evidence that joint ownership of natural competitors causes higher consumer prices.
      • Reply to Kennedy et al., who confirm our empirical results, and offer a structural critique.
      • Reply to Dennis et al., whose claims regarding robustness of the paper are factually incorrect.
      • Policy-oriented paper addressing FAQs and frequent misconceptions.
  6. (B1) Revealing Downturns, with Sergey Zhuk, Review of Financial Studies, 32(1), 2019, pp. 338-373.
    • Bayesian learning about asset's risk loadings implies negatively skewed stock returns and conditional volatility.

Academic Book Chapters

  1. (A1) Payout Policy, with Joan Farre-Mensa & Roni Michaely, reviews the literature on corporate payouts. [In: Robert Jarrow (Ed.), Annual Review of Financial Economics, Vol. 6, 2014]
  2. (A2) Common-Ownership Concentration and Corporate Conduct reviews the literature on common ownership concentration, firm behavior, and equilibrium outcomes. [In: Patrick Bolton (Ed.), Annual Review of Financial Economics, Vol. 10, 2018]

Working Papers (by topic)

(A1) Corporate Finance and Security Design

Pooling and Tranching under Belief Disagreement (with Juan Ortner) shows how pooling and tranching interact. [Slides]

Financing Payouts (with Joan Farre-Mensa and Roni Michaely) documents that a large fraction of dividends and repurchases are financed with simultaneous securities issuances.

Unionization, Cash, and Leverage uses a regression discontinuity design on unionization elections to identify the causal effect of unionization on firms' financial policies.

(A2) Common Ownership, Firm Behavior, and Market Outcomes

Common Ownership, Competition, and Top Management Incentives (with Miguel Antón, Florian Ederer, and Mireia Giné) shows that managers in more commonly owned industries have reduced incentives to maximize their own firms' value. [Fall 2016 NBER OE] [Slides]

Ultimate Ownership and Bank Competition (with José Azar and Sahil Raina) develops an index of ultimate ownership concentration and relates it to market-level prices of deposit banking products. [2016 NBER SI IO]

(A3) Political Economy of Central Banking & Monetary Economics

(Why) Do Central Banks Care About Their Profits? (with Igor Goncharov and Vasso Ioannidou) shows that central banks care about their profitability, especially when political pressure or career concerns are more pronounced, and when the population is more susceptible to populism and thus perhaps attacks on central bank independence. These findings have implications for the effectiveness and sustainability of non-traditional monetary policy, central bank design, and theoretical modeling in macroeconomics. [Slides] [R&R, Journal of Finance]

(B2) Behavioral Finance and Asset Pricing

Anxiety and Pro-Cyclical Risk Taking with Bayesian Agents (with Thomas Eisenbach) provides an explanation why some people sometimes become overconfident and take excessive risks.

Horizon-dependent Risk Aversion and the Timing and Pricing of Uncertainty (with Marianne Andries and Thomas Eisenbach) reconciles long-run risk models with a downward-sloping term structure of risk prices without requiring a preference for the early or late resolution of uncertainty. [Fall 2014 NBER AP] [R&R, Review of Financial Studies]

The Term Structure of the Price of Variance Risk (with Marianne Andries, Thomas Eisenbach, and Yichuan Wang) finds that the price of variance risk decreases with maturity, and thus helps distinguish between alternative asset pricing models.