About

Mitchell A. Petersen is the Glen Vasel Professor of Finance at the Kellogg School of Management, Northwestern University. He has published widely in finance and economics, with research focused on empirical corporate finance. His work explores how firms evaluate potential investment projects, how they fund these projects, and how they manage asset risk. His research emphasizes the impact of information costs, technology, competition, and taxes on firms' capital raising and funding decisions. Petersen has received numerous awards for his research, including the Smith-Breeden Prize and the Michael Brennan Award, and has served on the editorial boards of several prestigious finance journals. He is also a research associate with the National Bureau of Economic Research, has served on the board of the American Finance Association, and has been involved with Moody's Academic Advisory and Research Committee. His academic background includes a Ph.D. in Economics from MIT and an A.B. in Economics from Princeton University. Petersen's teaching interests encompass corporate finance, valuation, capital structure, dividend policy, tax strategy, and real options.

Research topics

• Business
• Economics
• Finance
• Actuarial science
• Monetary economics

Selected publications

• Understanding the Rise in Corporate Cash: Precautionary Savings or Foreign Taxes

  Review of Financial Studies · 2019-01-14 · 166 citations

  articleSenior authorCorresponding

  Abstract What has driven the dramatic rise in U.S. corporate cash? Using non-public data, we show that the run-up is not uniform across firms but is concentrated in the foreign subsidiaries of multinational firms. Standard precautionary motives explain only domestic cash holdings, not these burgeoning foreign cash balances. Falling foreign tax rates, coupled with relaxed restrictions on income shifting, are the root of the changing foreign cash patterns. Firms with intellectual property have the greatest ability to shift income to low tax jurisdictions, and their foreign subsidiaries are where we observe the largest accumulations of cash. Received September 6, 2017; editorial decision August 22, 2018 by Editor David Denis. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

  PublisherDOI

• Information: Hard and Soft

  National Bureau of Economic Research · 2018-09-01 · 154 citations

  preprintSenior author

  Information is a fundamental component of all financial transactions and markets, but it can arrive in multiple forms.We define what is meant by hard and soft information and describe the relative advantages of each.Hard information is quantitative, easy to store and transmit in impersonal ways, and its information content is independent of its collection.As technology changes the way we collect, process, and communicate information, it changes the structure of markets, design of financial intermediaries, and the incentives to use or misuse information.We survey the literature to understand how these concepts influence the continued evolution of financial markets and institutions.

  PublisherDOI

• Information: Hard and Soft

  SSRN Electronic Journal · 2018-01-01 · 190 citations

  articleOpen accessSenior author
  PublisherDOI

• Information: Hard and Soft

  The Review of Corporate Finance Studies · 2018-11-28 · 691 citations

  articleSenior author

  Information is a fundamental component of all financial transactions and markets, but it can arrive in multiple forms. We define what is meant by hard and soft information and describe the relative advantages of each. Hard information is quantitative, easy to store and transmit in impersonal ways, and its information content is independent of its collection. As technology changes the way we collect, process, and communicate information, it changes the structure of markets, design of financial intermediaries, and the incentives to use or misuse information. We survey the literature to understand how these concepts influence the continued evolution of financial markets and institutions.

  PublisherDOI

• West Teleservice

  Kellogg School of Management Cases · 2017-01-20

  article1st authorCorresponding

  West Teleservice, a telemarketing firm, is considering going public at the end of 1996. Asks students to price the IPO. During the previous 18 months, seven other telemarketing firms have gone public. Prior to this, there were no publicly traded telemarketing firms. The industry is in flux. Historically, wholly owned subsidiaries of telephone companies, banks, and insurance companies conducted telemarketing. However, cost cutting caused many of these firms to outsource the business. Thus, although total telemarketing business isn't growing very quickly, the outsourced portion is growing 50% per year. To introduce IPO valuations; to demonstrate the use and pitfalls of valuing firms with multiples–given this is the eighth firm to go public, there are seven other potential comparable firms; to construct a rough DCF; to demonstrate what assumptions must be implicit in the multiples to arrive at the same valuation; and to discuss the idea of mispriced equity, given some evidence suggesting that the price of equity is not sustainable.

  PublisherDOI

• The Right of Acquisition: Options in Commercial Real Estate

  Kellogg School of Management Cases · 2017-01-20

  articleSenior author

  In April 2012 Bill Nichols, a financial analyst at the real estate investment firm Koenig Capital, was about to enter a unique lease renegotiation. One of Koenig's tenants, Hasperat Inc., had sixteen years left on its long-term lease of the Kelley Building, a 165,000-square-foot office building in downtown Cleveland. The lease contained a clause giving Hasperat the option to buy the Kelley Building from Koenig. When Nichols tried to place a mortgage on the property to take advantage of low interest rates, he learned that the existence of this option in the lease contract prevented lenders from offering Koenig their lowest rates. As a result, Nichols had been tasked with renegotiating the lease to remove the option clause. This unexpected event offered Nichols the opportunity to use his financial skills. He needed to calculate the fair value of the purchase option to be able to justify to his superiors by how much they should compensate Hasperat. Students will step into the role of Bill Nichols and apply real options modeling techniques to value the purchase option in Hasperat's lease. After reading and analyzing the case, students will be able to:

  PublisherDOI

• Western-Southern Enterprise

  Kellogg School of Management Cases · 2017-01-20

  article1st authorCorresponding

  Examines the problem facing Western Southern Enterprise (WSE), a mutual insurance company, at the end of 1996. Its investment in Cincinnati Bell stock was phenomenally successful, but left the company potentially overweighted in equities in general and a single stock in particular. The cost of diversification is declaring and paying tax on a large capital gain. Possible solutions include maintaining the position, selling the position, or protecting the position by issuing a Debt Exchangeable for Common Stock security (DECS). Asks students to trade off the benefits of diversification (which they have to justify) against the cost of declaring the capital gain (which they must quantify). In defending their choices, students are asked to evaluate the various tax and nontax benefits and costs of each solution. Because the client (WSE) has several potentially contradictory objectives, the case lays out a situation where security design can improve upon the simple alternatives. Provides structuring details of the DECS, allowing discussion of why various features were included in their design. To discuss the costs of financial distress (or poor diversification) as well as teach security design.

  PublisherDOI

• Teuer Furniture (A): Discounted Cash Flow Valuation

  Kellogg School of Management Cases · 2017-01-20 · 1 citations

  article1st authorCorresponding

  Teuer Furniture is a privately owned, moderately sized chain of upscale home furnishing showrooms in the United States. The firm survived the economic recession and by the end of 2012, it has regained its financial footing. Now that the firm is more secure financially, some of its long-term investors have asked to cash out their investments. This will be the first time that Teuer has repurchased its equity; the company has paid dividends since 2009. Chief financial officer Jennifer Jerabek and her team have been given the task of valuing Teuer using a discounted cash flow approach. The discount rate is given in the case, and the students need to build a pro forma income statement, balance sheet, and cash flow statement and then calculate a per-share value for Teuer.

  PublisherDOI

• Grupo Pao de Acucar

  Kellogg School of Management Cases · 2017-01-20 · 1 citations

  article1st authorCorresponding

  At the end of 2011, one of the largest food retailers in Brazil, Grupo Pão de Açúcar, or GPA (a subsidiary of Companhia Brasileira De Distribuição, or CBD), was reviewing its accounts payable terms with suppliers in search of additional value. Manager of analytics Maria Cristina Santos was examining the trade credit terms GPA had with Oalem Ltda, a family-owned melon grower located in northeastern Brazil. Oalem, like most small family businesses, was financed with bank loans and equity that was held predominantly by the family. The case examines how accounts payable (trade credit) terms should be set or negotiated between a large retailer and a small supplier, especially when the bargaining power between the two may not be equal. The case demonstrates that trade credit terms can be as important as the terms of more traditional forms of financing. After analyzing and discussing the case, students should be able to:

  PublisherDOI

• Vioxx: Too Risky for Merck?

  Kellogg School of Management Cases · 2017-01-20

  article1st authorCorresponding

  Once a decision has turned out poorly—such as Merck's decision to launch and support the painkiller Vioxx—it is easy to criticize. However, are these bad outcomes the result of a good decision which turned out unlucky, or are they decisions where the bad outcome could have been predicted? This case follows Merck's pharmaceutical product Vioxx from initial development to launch and subsequent withdrawal, and considers the decisions made at each stage by the Merck executives involved. The case concludes by examining the financial impact of the Vioxx withdrawal on the company and on the Merck stock value. This case allows the students to examine the various steps of Vioxx's development and launch. By doing so, they can consider whether the decision-making process broke down and why. By connecting the Vioxx launch and withdrawal to changes in Merck's cash flow and stock market value, the students can document the impact of such decisions on the value of the firm.

  PublisherDOI

Frequent coauthors

• Michael W. Faulkender

  63 shared

• Raghuram G. Rajan

  Hoover Institution

  44 shared

• Janine Mukuddem-Petersen

  University of Cape Town

  31 shared

• Allen N. Berger

  University of South Carolina

  28 shared

• Jeremy C. Stein

  27 shared

• Nathan Miller

  St. Louis Children's Hospital

  26 shared

• José María Liberti

  12 shared

• I. M. Schoeman

  North-West University

  10 shared

Awards & honors

• Smith-Breeden Prize for Outstanding Paper in the Journal of…
• Michael Brennan Award for Best Paper in the Review of Financ…
• Sidney J. Levy Teaching Award (1996, 1999, 2001, 2003, 2006,…
• Kellogg Professor of the Year (2000)
• Richard J Daley Award by the Illinois Venture Capital Associ…