Marcus M. Opp, Ph.D.

Assistant Professor

Finance Group
UC Berkeley
Haas School of Business


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Research overview:

Research statement

1) Financial regulation, financial intermediaries (banks, rating agencies): (4), (8), (9), (10).

2) Contract and relationship dynamics: (3), (5), (7), (10).

3) International/ macro: trade theory, DSGE models: (1), (2), (5).


Publications and forthcoming papers:

(7) “Impatience vs. incentives,” 2015, joint with John Zhu, forthcoming, Econometrica. Presentation Slides from Econometric Society Meeting, Boston 2015.

Main insight: We study the dynamics of contracts in repeated principal-agent relationships with an impatient agent. Despite the absence of exogenous uncertainty, Pareto-optimal dynamic contracts generically oscillate between favoring the principal and favoring the agent.


(6) "Target Revaluation after Failed Takeover Attempts - Cash versus Stock," 2015, joint with Ulrike Malmendier and Farzad Saidi, forthcoming, Journal of Financial Economics.

Main insight: Cash- and stock-financed takeover bids induce strikingly different target revaluations in response to unsuccessful takeover bids. Targets of cash offers are revalued by +15% after deal failure, whereas stock targets return to their pre-announcement levels. Our results are most consistent with cash bids revealing prior undervaluation of the target. We reconcile our findings with the opposite conclusion in earlier literature (Bradley et al., 1983) by identifying a "look-ahead'' bias built into their sample construction.


(5) “Markup cycles, dynamic misallocation, and amplification," 2014, joint with Christine Parlour & Johan Walden, Journal of Economic Theory, 154, 126-161.
Main insight: Counter to conventional wisdom, oligopolistic competition produces procyclical aggregate markups if valuations are governed by preferences with a relative risk aversion coefficient greater than 1. With heterogeneous industries, aggregate fluctuations may originate from myopic strategic behavior at the industry-level.


(4) ''Rating agencies in the face of regulation,'' 2013, joint with Christian C. Opp & Milton Harris, Journal of Financial Economics, 108, 46-61.
Abridged version of paper for Fame magazine.
Main insight: The regulatory use of ratings feeds back into the ratings of profit-maximizing credit rating agencies. Rating inflation is expected to occur for complex securities.


(3) "Expropriation risk and technology,'' 2012, Journal of Financial Economics, 103, 113-129.
Main insight: Property rights (within a country) vary across industrial sectors according to their technology intensity, leading to a pecking order of expropriation. Firms can manage expropriation risk by forming conglomerates, i.e., bundling activities across sectors with different technology levels.


(2) "Tariff wars in a Ricardian model with a continuum of goods," 2010, Journal of International Economics, 80 (2), 212-225.
Main insight: I characterize optimum import tariffs in the Dornbusch-Fischer Samuelson model. Both higher absolute as well as higher comparative advantage increase equilibrium tariff rates. A sufficiently large economy prefers the Nash equilibrium of tariffs over free trade.

(1) "Rybczynski's theorem in the Heckscher-Ohlin world - anything goes," 2009, joint with Hugo Sonnenschein and Christis Tombazos, Journal of International Economics, 79 (1), 137-142.
Main insight: The predictions of the Rybczynski Theorem can be reversed in general equilibrium. This "reverse" outcome implies immiserizing factor growth.

Most recent papers:

(8) “Macroprudential bank capital regulation in a competitive financial system,” August 2014, joint with Milton Harris and Christian Opp.

Main insight: If banks face fierce competition from public markets, a small increase in capital requirements can cause an increase in the riskiness of the banking sector. Sufficiently large capital requirements can eliminate risk-taking by banks, but potentially lead to underfunding of socially valuable projects.


(9) “Regulatory reform and risk-taking: replacing ratings,” September 2014, joint with Bo Becker.

Main insight: We expose that a reform of capital regulation for insurance companies in 2009/2010 eliminated (to a first-order approximation) capital requirements for holdings of non-agency mortgage backed securities. Post reform, insurance companies allocate 54% of their purchases of new MBS issues toward non-investment grade assets (as opposed to 6% pre reform).


(10) “Regulating deferred incentive pay,” June 2014, joint with Florian Hoffmann and Roman Inderst.

Main insight: Regulatory restrictions on compensation design such as mandatory deferral of bonus payments can lead to increased risk in the financial sector. Such "backfiring" is particularly likely if capital requirements are high.



Working papers:

"Industrial Asset Pricing," joint with Christine Parlour and Johan Walden.

"Credit ratings on structured products," joint with Natalia Kovrijnykh.

dissertation committee:

Douglas W. Diamond (Chair)

Milton Harris

Raghuram G. Rajan

Morten Sorensen

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