Research AreasCorporate Finance
Assistant Professor of Finance
Townsend’s research is focused on corporate finance, with an emphasis on entrepreneurship and corporate governance. His research has been published in Journal of Finance, Journal of Financial Economics, and Management Science. In 2016 he was awarded a Kauffman Junior Faculty Fellowship for his research on entrepreneurship.
Townsend received a Bachelor's degree in Economics from Stanford University and earned his Ph.D in Economics from Harvard University in 2011. Prior to coming to the Rady School, Townsend was an Assistant Professor of Finance at the Tuck School of Business at Dartmouth College
How Do Quasi-Random Option Grants Affect CEO Risk-Taking? (with Kelly Shue), Journal of Finance, Forthcoming
Growth through Rigidity: An Explanation of the Rise in CEO Pay (with Kelly Shue), Journal of Financial Economics, 2017, 123(1): 1-21
The Impact of Venture Capital Monitoring (with Shai Bernstein and Xavier Giroud), Journal of Finance, Journal of Finance, 2016, 71(4): 1591-1622
Propagation of Financial Shocks: The Case of Venture Capital, Management Science, 2015, 61(11): 2782-2802
Working Papers and Work in Progress
The Consequences of Household Shocks on Employee Innovation (with Shai Bernstein and Timothy McQuade)
How do household shocks affect employee project selection and risk taking within firms? To study this question, we construct a unique dataset that links employee patenting with employee housing transactions. We find that employees who experience a negative shock to housing wealth during the financial crisis produce fewer patents and patents of lower quality relative to others in the same firm and in the same metropolitan area. They are also less likely to patent in technologies that are new to their firm or more generally to draw on information from outside of their firm’s existing knowledge base. Similarly, their patents combine information from fewer disparate fields and are used by a narrower set of technologies. The results are consistent with a career concerns model in which negative housing shocks lead to lower failure tolerance and therefore reduced risk taking within the firm. In contrast to the view that innovation is determined by firm level factors and the strategy set by top executives, this evidence suggests that shocks to individual inventors also affect the types of projects a firm pursues.
Experimenting with Entrepreneurship: The Effect of Job-Protected Leave (with Josh Gottleib and Ting Xu)
Do potential entrepreneurs remain in wage employment because of the danger that they will face worse job opportunities should their entrepreneurial ventures fail? Using a Canadian reform that extended job-protected leave to one year for women giving birth after a cutoff date, we study whether the option to return to a previous job increases entrepreneurship. A regression discontinuity design reveals that longer job-protected leave increases entrepreneurship by 1.8 percentage points. The results are driven by more educated entrepreneurs, starting firms that survive at least five years and hire paid employees, in industries where experimentation is more valuable.
Learning From Luck: Evidence From Mutual Fund Managers
This paper uses data on mutual fund managers to examine whether success breeds confidence. I find that the better a manager performs in a given year, the bolder the investments he tends to make in the following year. Next, I investigate whether observably lucky success breeds confidence as well. I isolate lucky success in two ways. First, I estimate success that is due to market-timing and not stock-picking. Second, I estimate success that is due to the market shock that followed September 11th. In both cases, I find evidence that lucky managers indeed become more confident in themselves, apparently attributing some of their good fortune to their own ability.