Sergey Chernenko, assistant professor, received the Martin Award for Excellence in Business Economics. His research and teaching fields include corporate and behavioral finance, which he taught at both the undergraduate and graduate levels as a teaching fellow.

His paper “The Real Consequences of Market Segmentation” has received the SAC Capital PhD Candidate Award for Outstanding Research and the Best Finance Paper Award at the Trans-Atlantic Doctoral Conference.

Areas of Expertise

• Corporate Finance
• Behavioral Finance

Education

• PhD in Business Economics from Harvard University

FIN 721 - Corporate Finance

This course continues the development of the principles of finance begun in Bus-Fin 620. The course briefly (sessions 2 – 5) reviews the concepts learned in 620 – such as time value of money, net present value rules, and simple capital budgeting problems. The effects of market imperfections are crucial in many of these decisions. The course puts it all together and revisit investment decisions to determine how we must alter the capital budgeting rules of Bus-Fin 620 to account for market imperfections.

Publications in Refereed Journals

• The Two Sides of Derivatives Usage: Hedging and Speculating with Interest Rate Swaps with Michael Faulkender, Journal of Financial and Quantitative Analysis, forthcoming 
• Trading Activity and Macroeconomic Announcements in High-Frequency Exchange Rate Data with Alain P. Chaboud and Jonathan H. Wright, Journal of the European Economic Association, April-May 2008, 6(2-3), 589-596 
• Order Flow and Exchange Rate Dynamics in Electronic Brokerage System Data with David W. Berger, Alain P. Chaboud, Edward Howorka, and Jonathan H. Wright, Journal of International Economics, May 2008, 75(1), 93-109

• The Quiet Run of 2011:  Money Market Funds and the European Debt Crisis                  with Adi Sunderam   
  
  • Abstract: We show that money market funds transmitted distress across firm during the European sovereign debt crisis. Using a novel data set of US money market fund holdings, we show that funds with large exposures to Eurozone banks suffered significant outflows between June and August 2011. These outflows have significant short-run spillover effects on other firms: non-Eurobank issuers that typically rely on these funds raise less financing in this period. The results are not driven by issuer riskiness or direct exposure to Europe: for the same issuer, money market funds with greater exposure to Eurozone banks decrease their holdings more than other funds. Our results illustrate that instabilities associated with money market funds persist despite recent changes to the regulations governing them.
• The Real Consequences of Market Segmentation
  with Adi Sunderam
  • Abstract: We study the real effects of market segmentation due to credit ratings using a matched sample of firms just above and just below the investment-grade cutoff. These firms have similar observables, including average investment rates. However, flows into high-yield mutual funds have an economically significant effect on the issuance and investment of the speculative-grade firms relative to their matches, especially for firms likely to be financially constrained. The effect is associated with the discrete change in label from investment-grade to speculative-grade, not with changes in continuous measures of credit quality. We do not find similar effects at other rating boundaries.
• Arbitrage Capital and Real Investment
  with Adi Sunderam
  • Abstract: We study the relationship between the supply of arbitrage capital and real investment. The investment of firms that depend on convertible debt for financing responds positively to flows into convertible arbitrage hedge funds. An extra $1 of fund flows increases capital expenditures of convertible dependent firms by $0.49. At the same time, convertible arbitrage strategy returns are uncorrelated with the stock returns of convertible dependent firms.
    
    Moreover, fund flows respond positively to lagged strategy returns but not to lagged returns of dependent firms, suggesting that the supply of capital is not driven by changes in firm investment opportunities. We also examine an isolated market dislocation that occurred in 2005 when funds suffered large withdrawals. Though the macroeconomic outlook was positive and stable, dependent firms sharply cut their investment in response to the withdrawal of capital, with the overall reduction in capital expenditures amounting to 55% of outflows. Our results suggest that firm investment responds to shocks to the supply of arbitrage capital.
• Agency Costs, Mispricing, and Ownership Structure
  with C. Fritz Foley and Robin Greenwood
  • Abstract: Standard agency theories of corporate ownership assume that because markets are efficient, insiders bear the costs of diverting resources from outside investors. We show that if equity is overvalued, however, the controlling shareholder lists more equity, and in equilibrium diverts more from outside investors. The greater is the scope for expropriation, the greater is the mispricing that is required for the controlling shareholder to list shares.
    
    We test predictions that follow from this idea on a sample of publicly listed corporate subsidiaries in Japan. We show that when there is greater scope for expropriation by the parent firm, minority shareholders fare poorly post-listing, experiencing risk-adjusted stock returns of between -60 and -71 basis points per month. Parent firms commonly repurchase subsidiaries, usually at large discounts to listing value, and they experience positive abnormal returns when these repurchases are announced.
• The High-Frequency Effects of U.S. Macroeconomic Data Releases on Prices and Trading Activity in the Global Interdealer Foreign Exchange Market
  with Alain P. Chaboud, Edward Howorka, Raj S. Krishnasami Iyer, David Liu, and Jonathan H. Wright, International Finance Discussion Paper 823
• The Information Content of Forward and Futures Prices: Market Expectations and the Price of Risk
  with Krista B. Schwartz and Jonathan H. Wright, International Finance Discussion Paper 808