Erwan Morellec

Professor of Finance at EPFL
Swiss Finance Institute Professor
Head of the Swiss Finance Institute PhD program
CEPR Research Fellow
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Erwan Morellec is a Full Professor of Finance at the Swiss Finance Institute (SFI) @ EPFL. His is also the Head of the SFI nation-wide PhD Program and a CEPR Research Fellow.

Erwan is most active in the areas of corporate finance and banking and has taught several courses on these subjects to undergraduate, MBA, and doctoral students. He is an expert on financing decisions, real options, risk management, liquidity management, and credit risk. His research has been presented at major academic conferences and seminar series around the world and is published in top rated academic journals such as the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. He has received several research and teaching awards. He holds a PhD in Finance summa cum Laude from HEC Paris.

Optimal financing with tokens
(with Sebastian Gryglewicz and Simon Mayer)
We develop a model in which a startup firm issues tokens to finance a digital platform, which creates agency conflicts between platform developers and outsiders. We show that token financing is generally preferred to equity financing, unless the platform expects strong cash flows or faces severe financing needs and large agency conflicts. Tokens are characterized by their utility features, facilitating transactions, and security features, granting cash flow rights. While security features trigger endogenous network effects and spur platform adoption, they also dilute developers’ equity stake and incentives so that the optimal level of security features decreases with agency conflicts and financing needs.

Debt, innovation, and growth
(with Thomas Geelen and Jakub Hajda) Working paper EPFL
Recent empirical studies show that innovative firms heavily rely on debt financing. Debt overhang implies that debt hampers investment by incumbents. We show that a second effect of debt is that it stimulates entry of new firms and, therefore, innovation. Using a Schumpeterian growth model in which firms’ dynamic R&D and financing choices are endogenously determined, we demonstrate that this second effect always dominates, so that debt fosters innovation and growth at the aggregate level. Our paper shows that debt financing has large effects on firm turnover and industry structure. It also predicts substantial intra-industry variation in leverage and innovation.

Cash flow shocks and financing policies
(with Sebastian Gryglewicz, Loriano Mancini, Enrique Schroth, and Philip Valta) Working paper EPFL
Theory has recently shown that corporate policies should respond differently to permanent or transitory cash flow shocks. We devise a novel filter to decompose cash flow shocks into permanent and transitory components. The policy choices of large publicly traded U.S. firms, such as cash holdings, credit line usage, and equity issuance, are related to the characteristics of the shocks estimated by our filter, i.e., volatilities, correlation and drift rates of the permanent and transitory shocks, as predicted by theory. Moreover, the interaction between the permanent and transitory cash flow shocks is strongly related to a firm’s leadership status within its industry.

Short-term debt and incentives for risk-taking
with Marco Della Seta and Francesca Zucchi, Journal of Financial Economics 137(1): 179-203, 2020.

Agency conflicts and short- vs. long-termism in corporate policies
with Sebastian Gryglewicz and Simon Mayer, Journal of Financial Economics 136(3), 718-742, 2020.

Product market competition and option prices
with Alexei Zhdanov, Review of Financial Studies 32(11): 4343-4386, 2019.

Agency conflicts around the world
with Boris Nikolov and Norman Schuerhoff, Review of Financial Studies, 31(11): 4232-4287, 2018.

Bank capital,liquid reserves, and insolvency risk
(Online appendix)
with Julien Hugonnier, Journal of Financial Economics, 125(2): 266–285, 2017.

Corporate policies with permanent and transitory shocks
with Jean-Paul Décamps, Sebastian Gryglewicz, and Stéphane Villeneuve, Review of Financial Studies, 30(1): 162-210, 2017.

Debt enforcement, investment, and risk-taking across countries
with Giovanni Favara, Enrique Schroth, and Philip Valta, Journal of Financial Economics,123(1): 22-41, 2017.

Capital supply uncertainty, cash holdings and investment
(Online appendix)
with Julien Hugonnier and Semyon Malamud, Review of Financial Studies, 28(2): 391–445, 2015.

Credit market frictions and capital structure dynamics
(Online appendix)
with Julien Hugonnier and Semyon Malamud, Journal of Economic Theory, 157: 1130–1158, 2015.

Financing investment: The choice between bonds and bank loans
with Philip Valta and Alexei Zhdanov, Management Science, 61(11): 2580-2602, 2015.

Corporate governance and capital structure dynamics
with Boris Nikolov and Norman Schuerhoff, Journal of Finance, 67(3): 803-848, 2012.

Corporate investment and financing under asymmetric information
with Norman Schuerhoff, Journal of Financial Economics, 99(2): 262-288, 2011.

Dynamic investment and financing under personal taxation
with Norman Schuerhoff, Review of Financial Studies, 23(1): 101-146, 2010.

Financing and takeovers
with Alexei Zhdanov, Journal of Financial Economics, 87(3): 556-581, 2008.

Stock returns in mergers and acquisitions
with Dirk Hackbarth, Journal of Finance, 63(3): 1203-1242, 2008.

Closed-form solutions to stochastic switching problems
with Pascal François, Journal of Mathematical Economics, 44(11): 1072-1083, 2008.

Agency conflicts and risk management
with Clifford W. Smith, Review of Finance, 11(1): 1-23, 2007.

Corporate control and real investment in incomplete markets
with Julien Hugonnier, Journal of Economic Dynamics and Control, 31(5): 1781-1800, 2007.

Capital structure, credit risk, and macroeconomic conditions
with Dirk Hackbarth and Jianjun Miao, Journal of Financial Economics, 82(3): 519-550, 2006.

On the debt capacity of growth options
with Michael J. Barclay and Clifford W. Smith, Journal of Business, 79(1): 37-59, 2006.

Irreversible investment with regime shifts
with Xin Guo and Jianjun Miao, Journal of Economic Theory, 122(1): 37-59, 2005.

The dynamics of mergers and acquisitions
with Alexei Zhdanov, Journal of Financial Economics, 77(3): 649-672, 2005.

Can managerial discretion explain observed leverage ratios?
Review of Financial Studies, 17(1): 257-294.

Capital structure and asset prices: Some effects of bankruptcy procedures
with Pascal François, Journal of Business, 77(2): 387-411, 2004.

Asset liquidity, capital structure, and secured debt
Journal of Financial Economics, 61(2): 173-206, 2001.


Principles of Finance


This course is intended to provide a market-oriented framework for analyzing the major types of financial decisions made by corporations. Lectures and readings will provide an introduction to present value techniques, capital budgeting principles and problems, asset valuation, the operation and efficiency of financial markets, the financial decisions of firms, and derivatives. Throughout the class, we will solve problems to enhance our understanding of the covered topics.


Dynamic Corporate Finance (SFI PhD program)


This course is designed to provide a framework for understanding the determinants of corporate financing, dividend, hedging, investment, and compensation policies. The course will provide both an economic analysis of the determinants  of each policy and a quantitative analysis of the effects of these determinants. There is no required textbook. Readings will be based on scientific articles. Topics covered: Real options; Dynamic contracting; Dynamic adverse selection; Financing frictions; Dynamic capital structure models with and without commitment; Runs