Simon Business School
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Faculty Profile

Olga Itenberg
Assistant Professor
Phone: 585.275.3102
Office: 3-147 Carol Simon Hall

Research Interests

Dynamic Corporate Finance, Economic Growth, Macro-Finance

Professional History

Assistant Professor
University of Rochester, Simon Business School
July 2014 -
2008 - 2014

Education

University of Pennsylvania - 2014
Ph D
Economics
Leonard N. Stern School of Business - 2008
BS

Current Research Programs

Capital Structure and Investment: Divergence between High and Low-Tech Firms
Since the 1970s, the leverage of high-tech firms in the United States fell from 22% to 9%, while low-tech firms did not experience a similar change in their capital structure. Over the same period, high-tech firms have increased their investment in innovation and have shifted resources toward riskier innovation projects. We document these novel facts empirically and propose a dynamic two-sector model of equilibrium capital structure based on firms’ investment in physical and intangible capital. The model delivers high-tech firms optimally choosing higher levels of intangible investment, through increased innovation, and low leverage ratios compared to low- tech firms. The interaction between high costs associated with adjusting innovation activity and difficulty of collateralizing intangible capital provides an incentive for firms to finance innovative projects with costly external equity when faced with idiosyncratic risk. Using equity to finance intangible investment today safeguards high-tech, innovation intensive firms from having to issue further equity in the event of large negative shocks to liquidity at later dates. We use the model to parse apart specific contributions of two possible explanations for the leverage trends over the past decades: one, relying on financial deregulation and tax changes over the period resulting in reduced cost of equity financing over the period and the other, stemming from increased complexity of the technological frontier leading to increased risk embedded in new innovations.
Firm Size, Equity Financing and Innovation Activity
I document a stark reallocation of innovation activity, measured by both R&D expenditures and patenting, from large to small public manufacturing firms in the U.S. over the period 1976 to 2005. Whereas in the past, different sized firms seemed to appropriate close to a constant proportion of their revenues to R&D, nowadays, small firms contribute orders of magnitude more to these efforts as compared to their larger counterparts. In this paper, I relate the rise in innovation intensity of small firms to their increased use of external equity financing. Next, I establish that two financial changes, decreased costs of issuing equity and tax rates on corporate distributions, are quantitatively important drivers of the innovation and equity trends. To do so, I build a theoretical model with firm dynamics, in which heterogeneous firms choose innovation efforts and finance their R&D via internal and costly external funds. In the absence of taxes and external financing costs, the model generates a negative relationship between innovation incentives and firm size, inducing a disproportionate investment in R&D by small firms. Introducing these frictions into the model disrupts the monotonic relationship between R&D intensity and firm size. The model, estimated using U.S. public firm-level data, is able generate a sizable rise in innovation intensity and equity financing use among small firms as a result of changes in dividend tax rates and equity issuance costs.
Patents as Collateral and Directed Technical Change
In recent years, and in spite of their intangible nature, patents have been increasingly used as collateral in the United States. We show that this financial innovation has disproportionately drawn firm entry into crowded innovative indus- tries that produce patents easier to trade and hence more attractive as collateral. We study the effects of the use of patents as collateral in a multi-sector endoge- nous growth framework with expanding input varieties, where the intermediate sectors differ in market size. Our model predicts that the use of patents as col- lateral directs future technological progress towards sectors with more patenting firms, which are not necessarily the most productive sectors. We use the model to explore quantitatively the effects of patents as collateral both to relax financial frictions and to direct technological innovation inefficiently.
Syndicated Equity Crowdfunding: The Trade-Off between Deal Access and Conflicts of Interest
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