Lorenzo Bretscher

Lorenzo Bretscher is Assistant Professor of Finance at the University of Lausanne. Before joining the faculty in Lausanne, Professor Bretscher was affiliated with the London Business School. In 2017, he was awarded the Nasdaq/European Finance Association Doctoral Tutorial Best Paper Award. Prior to his doctoral studies he worked as an analyst at Credit Suisse for two years.

Expertise

Professor Bretscher is currently studying the book and market valuation of corporate debt, as well as the mechanisms of institutional corporate debt pricing. When the valuation of bonds and loans on corporations' books is compared to that on the secondary debt market, data reveals significant discrepancies, in particular for distressed firms, between market and book valuations. These results allow Professor Bretscher to develop a novel market-based measure of leverage, asset returns, and financial distress, as well as to revisit a number of empirical conundrums revolving around corporate debt. The measure developed helps solve the credit spread puzzle in corporate bond prices as well as the financial distress puzzle. When estimating the demand of institutional investors for corporate bonds, he discovers that insurance companies tilt their portfolios toward investment-grade, long-dated, and more illiquid bonds, while mutual funds focus more on high-yield, short-dated, and liquid bonds. This heterogeneity in the composition of institutional demand for corporate bonds predicts that policy changes trigger substantial price disruptions. In a broader perspective, this work shows that proper valuation goes a long way, and also that firms need to be aware that their optimal capital structure is closely linked to their investors' preferences.