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. He is a recipient of the Kauffman Foundation Junior Faculty Fellowship for entrepreneurship research. His research has been awarded the Journal of Financial Economics Jensen Prize and the AQR Insight Award.
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.
Do Household Wealth Shocks Affect Productivity? Evidence from Innovative Workers During the Great Recession
(with Shai Bernstein and Timothy McQuade), Journal of Finance, Forthcoming
Are Early Stage Investors Biased Against Women?
(with Michael Ewens), Journal of Financial Economics, Forthcoming
How Do Quasi-Random Option Grants Affect CEO Risk-Taking?
(with Kelly Shue), Journal of Finance, 2017, 76(6): 2551-2588
Growth through Rigidity: An Explanation of the Rise in CEO Pay (Lead Article)
(with Kelly Shue), Journal of Financial Economics, 2017, 123(1): 1-21
JFE Jensen Prize for Best Papers in Corporate Finance and Organizations (2nd Prize)
The Impact of Venture Capital Monitoring
(with Shai Bernstein and Xavier Giroud), Journal of Finance, 2016, 71(4): 1591-1622
Propagation of Financial Shocks: The Case of Venture Capital
Management Science, 2015, 61(11): 2782-2802
Can the Market Multiply and Divide? Non-Proportional Thinking in Financial Markets
(with Kelly Shue), Revise and Resubmit, Journal of Finance
AQR Insight Award (1st Prize)
We hypothesize that investors partially think about stock price changes in dollar rather than percentage units, leading to more extreme return responses to news for lower-priced stocks. Consistent with such non-proportional thinking, we find a doubling in price is associated with a 20-30% decline in volatility and beta (controlling for size and liquidity). To identify a causal effect of price, we show that volatility increases sharply following stock splits and drops following reverse splits. Lower-priced stocks also respond more strongly to firmspecific news of the same magnitude. Non-proportional thinking offers a unifying explanation for asset pricing patterns such as the size-volatility/beta relation, the leverageeffect
puzzle, and return reversals.
Does Career Risk Deter Potential Entrepreneurs?
(with Joshua Gottleib and Ting Xu), Revise and Resubmit, Review of Financial Studies
Do potential entrepreneurs remain in wage employment because of concerns 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 1.9 percentage points. These entrepreneurs start incorporated businesses that hire employees—in industries where experimentation before entry has low costs and high benefits. The effects are concentrated among those with more human and financial capital.
How do Consumers Fare when Dealing with Debt Collectors? Evidence from Out-of-Court Settlements
(with Ing-Haw Cheng and Felipe Severino), Revise and Resubmit, Review of Financial Studies
Do deals with debt collectors alleviate consumer financial distress? Using new data linking court and credit registry records, we examine civil collection lawsuits where consumers can settle out of court. Random assignment of judges with different styles generates exogenous variation in the likelihood of settlement negotiations. We find that settlements increase consumer financial distress. Settlements appear to increase distress by draining liquidity without improving access to credit or lowering total payments. Consumers might agree to distress-inducing deals for non-pecuniary reasons or because they are ill-informed of their options.