Areas of Expertise

Corporate Finance, Capital Structure, Mergers & Acquisitions and Restructurings, Payout Policy, Banking

Academic Degrees

• PhD, University of Florida, 1993
• BA, Colgate University, 1989

Professional Experience

• University of Iowa, Tippie College of Business, Professor of Finance, 1998-2011
• University of Miami, Assistant Professor of Finance, 1996 – 1998
• Federal Deposit Insurance Corporation, Washington, DC Financial Economist, 1993 - 1996

Selected Publications

• Billett, M. T., Elkamhi, R., Popov, L., and Pungaliya, R.S. (2016). Bank Skin in the Game and Loan Contract Design: Evidence from Covenant-Lite Loans. Journal of Financial and Quantitative Analysis, 51(3), 839-873.

  Abstract

  Abstract

  In a model of dual agency problems where borrower-lenders and bank-nonbank incentives may conflict, we predict a hockey stick relation between bank skin in the game and covenant tightness. As bank participation declines covenant tightness increases until reaching a low threshold, at which point the relation sharply reverses and covenant protection is removed with a commensurate increase in spread. We find support for the hockey stick relation with banks stake in covenant-lite loans averaging 8% (0% median). We also find that covenant-lite loans are more likely when borrower moral hazard is less severe and when bank relationship rents are high.

• Billett, M. T., Jiang, Z., and Rego, L. L. (2014). Glamour Brands and Glamour Stocks. Journal of Economic Behavior & Organization, 107(Part B), 744–759.
• Billett, M. T., Garfinkel, J. A., and Jiang, Y. (2011). The Influence of Governance on Investment: Evidence from a Hazard Model. Journal of Financial Economics, 102(3), 643-670.
• Billett, M. T., Flannery, M. J., and Garfinkel, J. A. (2011). Frequent Issuers’ Influence on Long-Run Post-Issuance Returns. Journal of Financial Economics, 99(2), 349-364.
• Billett, M. T., Jiang, Z., and Lie, E. (2010). The Effect of Change-in-Control Covenants on Takeovers: Evidence from Leveraged Buyouts. Journal of Corporate Finance, 16(1), 1-15.
• Billett, M. T., Mauer, D. C., and Zhang, Y. (2010). Stockholder and Bondholder Wealth Effects of CEO Incentive Grants. Financial Management, 39(2), 463-487. 
• Rego, L. L., Billett, M. T., and Morgan, N. A. (2009). Customer-Based Brand Equity and Firm Risk. Journal of Marketing, 73(6), 47-60.

  Abstract

  Abstract

  Investors and managers evaluate potential investments in terms of risk and return. Research has focused on linking marketing activities and resource deployments with returns but has largely neglected marketing's role in determining risk. Yet the theoretical literature asserts that investments in market-based assets, such as brands, should lead to reductions in firm risk. Adopting risk measures that are well established in the finance literature, the authors use credit ratings to capture debt-holder risk and the standard deviation of stock returns to measure equity-holder risk, which they then decompose into systematic and unsystematic equity risk. The authors examine the impact of consumer-based brand equity (CBBE) on firm risk using data covering 252 firms from EquiTrend, COMPUSTAT, and the Center for Research in Security Prices over the 2000-2006 period. They find that a firm's CBBE is associated with firm risk and explains variance in the risk measures beyond that explained by existing finance models (i.e., it has "risk relevance"). They also find that CBBE has a stronger role in predicting firm-specific unsystematic risk than systematic risk. The results have clear economic significance and suggest that managers should make brand management part of the firm's risk management strategy and protect or even increase CBBE investments during periods of economic uncertainty.

• Billett, M. T., and Qian, Y. (2008). Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers. Management Science, 54(6), 1037-1051. 
• Billett, M. T., King, D., and Mauer, D. (2007). Growth Opportunities and the Choice of Leverage, Debt Maturity, and Covenants. Journal of Finance, 62(2), 697-730.
• Billett, M. T., and Xue, H. (2007). Share Repurchases and the Need for External Finance. Journal of Applied Corporate Finance, 19(3), 42–55.
• Billett, M. T., and Xue, H. (2007). The Takeover Deterrent Effect of Open Market Share Repurchases. Journal of Finance, 62(4), 1827-1850.
• Billett, M. T., Flannery, M., and Garfinkel, J.  (2006). Are Bank Loans Special? Evidence from the Post-Announcement Performance of Bank Borrowers. Journal of Financial and Quantitative Analysis, 41(4), 733-751. 
• Billett, M. T., and Vijh, A. (2004). The Wealth Effects of Tracking Stock Restructurings. Journal of Financial Research, 27(4), 559-583.
• Billett, M. T., King, D., and Mauer, D. C. (2004). Bondholder Wealth Effects in Mergers and Acquisitions: New Evidence from the 1980s and 1990s. Journal of Finance, 59(1), 107-135.
• Billett, M. T., and Garfinkel, J. A. (2004). Financial Flexibility and the Cost of External Finance for U.S. Bank Holding Companies. Journal of Money, Credit and Banking, 36(5), 827-852.
• Billett, M. T., and Mauer, D. C. (2003). Cross Subsidies, External Financing Constraints, and the Contribution of the Internal Capital Market to Firm Value. Review of Financial Studies, 16(4), 1167-1201.
• Billett, M. T., and Mauer, D. C. (2000). Diversification and the Value of Internal Capital Markets: The Case of Tracking Stock. Journal of Banking and Finance, 24(9), 1457-1490.  
• Billett, M. T., Garfinkel, J. A., and O’Neal, E. S. (1998). The Cost of Market versus Regulatory Discipline in Banking. Journal of Financial Economics, 48(3), 245-282. Reprinted in: Maximilian J.B. Hall (ed.) (2002), The Regulation and Supervision of Banks, Cheltenham, UK: Edward Elgar.
• Billett, M. T., and Ryngaert, M. D. (1997). Capital Structure, Asset Structure and Equity Takeover Premiums in Cash Tender Offers. Journal of Corporate Finance, 3(2), 141-165.
• Billett, M. T. (1996). Targeting Capital Structure: The Relationship Between Risky Debt and the Firm’s Likelihood of Being Acquired. Journal of Business, 69(2), 173-192.
• Billett, M. T., Flannery, M. J., and Garfinkel, J. A. (1995). The Effect of Lender Identity on a Borrowing Firm’s Equity Return. Journal of Finance, 50(2), 699-718.

Edited on August 4, 2023