Boris Vallee

Boris Vallée is an Associate Professor in the Finance Unit. He teaches Real Property in the MBA elective curriculum, and previously taught the Finance II course in the MBA required curriculum.

Professor’s Vallée’s research traces the motives behind and the effects of financial innovation in recent decades. He pursues this line of inquiry through empirical studies of corporate finance, household finance, public finance, and financial institutions, developing novel data sets and measures. His work has been cited by Forbes, The Wall Street Journal and the Boston Globe.

He holds a Ph.D. in finance and a M.Sc. in management, both from HEC Paris, and is a CFA Charterholder. Before beginning his doctoral studies, Professor Vallée was an investment banker at Deutsche Bank in London.

RESEARCH SUMMARY

Professor Vallée focuses on financial innovation, investigating it from different angles. This research thread has led him to relate the methods and insights of corporate finance and banking with those of other subfields, including household finance, public finance, political economy, and industrial organization. To analyze the scope and use of innovative financial products, he has constructed new data sets and original variables, an approach that has led him to interact with practitioners, hand-collect data, and conduct text-based analysis.

Financial Complexity

A frequently debated consequence of financial innovation is the increasing complexity of financial instruments. Professor Vallée and his co-author have studied the retail market for structured financial products, such as an instrument that provides capital protection and returns based on an underlying index. By performing a text analysis of the term sheets of the 55,000 such products issued in Europe since 2002 and constructing three indexes measuring complexity, he has found a steady increase in complexity, with no significant decline after the recent financial crisis. Further, Professor Vallée’s analysis shows that banks with the least sophisticated clients use complex instruments most prominently, and that financial complexity increases when competition intensifies.

Financial Institutions and Contingent Capital

In light of the concern about high leverage of financial institutions, Professor Vallée has researched the market reaction and economic performance following the exercise of contingent capital options, which convert debt into equity, embedded in some specific bank-issued capital instruments. During the financial crisis, European banks massively triggered option features of hybrid bonds they had issued in response to regulatory capital requirements in order to reduce their debt burden. This episode constitutes the first real-world experiment on the use of contingent capital features. Professor Vallée finds that these trigger events are positively received by credit markets; stockholder reaction is more mixed, depending on the type of resulting debt relief and leverage. Moreover, banks that obtain regulatory debt relief by using this option exhibit higher economic performance than similar banks that do not. These findings point to the possible constructive role of innovative debt instruments as an effective solution to the dilemma of bank capital regulation.

Innovative Borrowing Instruments in Public Finance

Professor Vallée and his research collaborator have examined toxic loans as borrowing instruments used by local governments to hide debt cost for their own strategic advantage. While politicians often argue that banks “fool” them with complex products, Professor Vallée’s findings support a different explanation. Using proprietary data, he shows that politicians strategically use risky borrowing instruments to increase their chances of re-election. For instance, toxic loans are utilized significantly more often by highly indebted local governments and in politically contested areas.

AWARDS & HONORS

• Winner of the 2015 HEC Foundation PhD Thesis Prize for, “Three Essays on Financial Innovation.”
• Winner of the 2015 Arthur Warga Award for Best Paper in Fixed Income from the Society for Financial Studies for “Call Me Maybe? The Effects of Exercising Contingent Capital.”
• Awarded the 2015 Ieke van den Burg Prize for Research on Systemic Risk from the European Systemic Risk Board (ESRB) for "The Motives for Financial Complexity: An Empirical Investigation" with Claire Célérier.
• Winner of a Benjamin Delessert Award for Household Savings Special Jury Prize (pdf) in 2015 for his PhD thesis, "Three Essays on Financial Intermediation."
• Winner of 2015 Best PhD Thesis in Economics from the Association Française de Science Economique (AFSE).
• Winner of the 2014 Best PhD Thesis in Financial Markets from the Association Françoise de Finance/Institut Européen de données financièries (AFFI/EUROFIDAI).
• Winner of the 2014 Top Finance Graduate Award from the Center for Financial Frictions (FRIC) and the Department of Finance at Copenhagen Business School.
• Finalist for the 2013 Best Finance PhD Dissertation Award in Honor of Professor Stuart I. Greenbaum from the John M. Olin School of Business at Washington University in St. Louis.
• Winner of the 2020 Rising Scholar Award from the Review of Corporate Finance Studies for “Contingent Capital Trigger Effects: Evidence from Liability Management Exercises” (September 2019).

PUBLICATIONS

JOURNAL ARTICLES

• Calvet, Laurent, Claire Célérier, Paolo Sodini, and Boris Vallée. "Can Security Design Foster Household Risk-Taking?" (pdf) Journal of Finance (forthcoming). View Details
• Vallée, Boris. "Contingent Capital Trigger Effects: Evidence from Liability Management Exercises." (pdf) Review of Corporate Finance Studies 8, no. 2 (September 2019): 235–259. View Details
• Vallée, Boris, and Claire Célérier. "Returns to Talent and the Finance Wage Premium." (pdf) Review of Financial Studies 32, no. 10 (October 2019): 4005–4040. View Details
• Vallée, Boris, and Yao Zeng. "Marketplace Lending: A New Banking Paradigm?" Review of Financial Studies 32, no. 5 (May 2019): 1939–1982. View Details
• Pérignon, Christophe, and Boris Vallée. "The Political Economy of Financial Innovation: Evidence from Local Governments." Review of Financial Studies 30, no. 6 (June 2017): 1903–1934. View Details
• Célérier, Claire, and Boris Vallée. "Catering to Investors Through Security Design: Headline Rate and Complexity." Quarterly Journal of Economics 132, no. 3 (August 2017): 1469–1508. View Details

WORKING PAPERS

• Célérier, Claire, Boris Vallée, and Alexey Vasilenko. "What Drives the Finance Academia Wage Premium?" Working Paper, September 2021. View Details
• Vallée, Boris, Gordon Liao, and Claire Célérier. "The Price Effects of Innovative Security Design." Working Paper, August 2021. View Details
• Vallée, Boris, and Julien Sauvagnat. "The Effects of Local Government Financial Distress: Evidence from Toxic Loans." (pdf) Working Paper, February 2021. View Details
• Vallée, Boris, Pulak Ghosh, and Yao Zeng. "FinTech Lending and Cashless Payments." (pdf) Working Paper, February 2021. View Details
• Vallée, Boris, Julien Sauvagnat, Thorsten Martin, and Jean-Noel Barrot. "Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Guarantee Program." (pdf) Working Paper, February 2020. View Details
• Ivashina, Victoria, and Boris Vallée. "Weak Credit Covenants." (pdf) NBER Working Paper Series, No. 27316, June 2020. (R&R at the Journal of Financial Economics.) View Details

CASES AND TEACHING MATERIALS

• Vallee, Boris, and Nikodem Szumilo. "The Big Blue: Starting a Real Estate Firm." Harvard Business School Case 222-036, October 2021. View Details
• Vallee, Boris, and Mauricio Larrain. "Migrante: Using Tech to Provide Financial Inclusion to Immigrants." Harvard Business School Teaching Note 222-020, September 2021. View Details
• Vallee, Boris, and Mauricio Larrain. "Migrante: Using Tech to Provide Financial Inclusion to Immigrants." Harvard Business School Case 221-108, July 2021. View Details
• Green, Daniel, Boris Vallee, Sid Beaumaster, and Yang (Dolly) Yu. "A Case in Point: Shared Home Equity." Harvard Business School Case 221-026, October 2020. (Revised September 2021.) View Details
• Vallee, Boris, and Yang (Dolly) Yu. "Seso Global: Building a Blockchain-enabled Property Marketplace in Nigeria." Harvard Business School Case 220-055, February 2020. View Details
• Cole, Shawn, Boris Vallée, and Nicole Tempest Keller. "OpenInvest." Harvard Business School Case 218-064, February 2018. (Revised August 2018.) View Details
• Vallee, Boris, and Caitlin Reimers Brumme. "OpenInvest." Harvard Business School Teaching Note 218-089, March 2018. (Revised March 2018.) View Details
• Vallee, Boris. "Live Excel Supplement OpenInvest." Harvard Business School Spreadsheet Supplement 218-715, March 2018. View Details
• Vallée, Boris, and Jérôme Lenhardt. "Deutsche Bank: Structured Retail Products." Harvard Business School Teaching Note 218-061, December 2017. (Revised March 2018.) View Details
• Vallee, Boris, Patrick Augustin, and Philippe Rich. "Exotic Interest Rate Swaps: Snowballs in Portugal." Harvard Business School Teaching Note 218-018, August 2017. View Details
• Vallee, Boris, and Botir Kobilov. "Tableau." Harvard Business School Teaching Note 217-074, June 2017. (Revised November 2020.) View Details
• Vallee, Boris, Patrick Augustin, and Philippe Rich. "Exotic Interest Rate Swaps: Snowballs in Portugal." Harvard Business School Case 217-050, January 2017. View Details
• Vallée, Boris, and Jérôme Lenhardt. "Deutsche Bank: Structured Retail Products." Harvard Business School Case 217-037, November 2016. (Revised March 2018.) View Details
• Vallee, Boris. "Tableau." Harvard Business School Case 216-045, March 2016. (Revised November 2020.) View Details