I am an Assistant Professor of Finance at Bentley University. My primary research interests include corporate finance, corporate governance, and the regulation of banks.
I hold a PhD in Finance from Vienna Graduate School of Finance (VGSF). Prior to joining Bentley University, I was a visiting scholar at NYU Stern School of Business and a post-doctoral researcher at Vienna University of Economics and Business.
Contact me: nkostic@bentley.edu
Working papers (∗presented by co-author, underlined titles are available online)
Inside debt, bonus caps, and risk taking in banks
Abstract: Including unsecured inside debt in compensation contracts of bank managers, as well as capping their bonuses, are some of the rules that regulators propose in an effort to limit risk taking of banks. I show that mandatory unsecured inside debt does not always decrease and in some cases even increases bank risk when implemented in isolation. The joint effect of bonus caps and inside debt can either lead to an increase or a decrease in bank risk, depending on the design of the bonus cap. My paper has implications for policy measures aimed at regulating the remuneration of bank managers.
Presentations: VGSF Conference (2023), ERC Summer School/PhD Workshop at HEC (2023), French Finance Association PhD workshop (2024), 13th International Conference of the FEBS (2024), 39th AWG Workshop (2024), FWFS-GNY (2024), NYU Corporate Governance Luncheon (2025), FTG Summer School (2025)
Accounting Changes and Enforcement of Bank Capital Requirements in a crisis
(R&R in Journal of Accounting Research)
with Christian Laux and Viktoria Muthsam
Abstract: In a systemic banking crisis, regulators often relax the accounting rules that determine regulatory capital. We develop a model to show that these changes can increase banks' incentives to raise capital. Banks trade off the cost of raising equity and violating regulatory capital requirements. A crisis weakens the enforcement of capital requirements, reducing banks’ incentives to recapitalize. Reducing the impact of fair value or expected credit losses on banks’ regulatory capital lowers the amount of equity that banks must raise to fulfill regulatory capital requirements. Banks that do not recapitalize under existing accounting rules can find it optimal to raise equity to avoid regulatory intervention after accounting rules are relaxed. We also discuss the distinct roles of commitment to enforce regulatory capital requirements and commitment to not change accounting rules and compare relaxing accounting rules and other mechanisms, such as relaxing capital requirements.
Presentations: VGSF Conference (2021), 36th AWG Workshop (2021)*, 13th Accounting Research Workshop (2022), EAA Annual Congress (2023)*, 14th Accounting Research Workshop (2023)*, 12th International Conference of the FEBS (2023), VfS Annual Meeting (2023), 9th Workshop on Accounting and Regulation (2023)*, DGF Annual Meeting (2023), Annual Meeting of the Austrian Economic Association (2023)*, 38th AWG Workshop (2023), Accounting and Economics Society Annual Conference (2024)
Work in progress
Risk reduction as a signal of quality in banks with nonverifiable losses
Abstract: This paper explores whether the observed differences in bank risk taking behavior can signal asset quality when crisis-induced losses cannot be credibly disclosed. Specifically, it examines whether reduced risk taking under asymmetric information can indicate higher asset quality. I show that even when all banks have gambling incentives regardless of their asset quality, these incentives may be tempered for banks with assets of higher quality by their motivation to signal their type. The paper offers an explanation for the mixed empirical evidence on bank risk taking behavior during crises.
Teaching and Mentoring
Bentley University, Waltham, USA
Advanced Managerial Finance (undergraduate), from September 2025
Financial Statement Analysis (graduate), from September 2025
Vienna University of Economics and Business, Vienna, Austria
Basics in Finance (undergraduate), March 2025 - June 2025
Corporate Finance (undergraduate), September 2021 - September 2024
Financial Management and Valuation (undergraduate), September 2020 - September 2021
Corporate Risk Management (undergraduate), September 2019 - September 2020
Bachelor Thesis Co-supervision, September 2018 - Present
Master Thesis Co-supervision, March 2022 - Present