Research

Inflation Pass-Through Heterogeneity and Firm Value (with Alexander F. Wagner)

To exactly apply the Fisher (1896, 1930) equation in firm valuation, investors need to account for heterogeneous firm-level inflation. Instead, they commonly expect firms to pass through the aggregate inflation. A simple framework illustrates that higher-than-expected pass-through lowers the real cost of capital and affects perceived free cash flow growth only if changes in pass-through rates, relative to aggregate inflation, are positive. Empirically, high-pricing-power firms outperform during inflationary periods driven by both cost of capital and free cash flow effects. Analysts’ failure to adjust earnings forecasts for pricing power post inflation shocks leads to earnings surprises. These results offer new insights into inflation’s implications for asset pricing and valuation.

Link to paper (coming soon)

Conferences and Seminars (* scheduled): 2nd Lake District Workshop in Corporate Finance, Tri-City Bridge Workshop on Empirical Research in Finance 2025, AFA Annual Meeting 2025 (Poster Session), BBLS Seminar at the University of Zurich Fall 2024, SFI Research Days 2024.

The Role of Financial Markets in Corporate Inflation Transmission (single-authored)