Lending After Trust is Broken

France McCloskey.

How does unethical behavior influence investment?

In this lecture, we will look at how private lenders and bond investors react to the revelation of unethical behavior. We will discuss some evidence of a strong reaction by banks, but we will see that bond markets fail to react. As a consequence, unethical borrowers migrate to public debt markets, with deep consequences for everyone who invests in corporate bonds. If time allows, we will look at how managers and firms can mitigate negative perceptions and lower borrowing costs after the revelation of unethical behavior.

Veljko Fotak has earned BS, MS, and MBA degrees from the Rochester Institute of Technology and a PhD in Finance from the University of Oklahoma. Veljko’s research has been published in leading academic journals and has been quoted in business and mainstream media — including the Washington Post, Wall Street Journal, Bloomberg Business and New York Post — for his expertise on corporate financing, sovereign wealth funds, and disputes between governments and foreign investors. Most recently, Veljko’s work has focused on the detection and consequences of managerial unethical behavior.

Originally presented on Wednesday, April 11, 2018.