Robert McDonald
Gaylord Freeman Distinguished Chair in Banking Professor of Finance at Kellogg School of Management
Biography
Kellogg School of Management
Robert McDonald is Gaylord Freeman Distinguished Chair in Banking a Professor of Finance. He has been a faculty member at Kellogg since 1984 and also served as Finance department chair and and Senior Associate Dean for Faculty and Research. Before joining Kellogg, he was a faculty member at Boston University and has been a visiting professor at the University of Chicago. He has taught courses in derivatives, corporate finance, taxation, and data analytics.
Professor McDonald's research interests include corporate finance, taxation, derivatives, and applications of option pricing theory to corporate investments. He has won research awards, including the Graham and Dodd Scroll from the Financial Analyst's Federation, the Iddo Sarnat Prize from the Journal of Banking and Finance, the Smith Breeden Prize from the Journal of Finance, and the Review of Financial Studies Prize from the Review of Financial Studies.
Professor McDonald is a research associate of the National Bureau of Economic Research, a former director of the American Finance Association, Former Co-Editor of the Review of Financial Studies, and has served on a number of editorial boards, including those for the Journal of Finance, Management Science, and the Journal of Financial and Quantitative Analysis. He is the author of Derivatives Markets, 3e, a text published in 2013, and Fundamentals of Derivatives Markets, published in 2008. He received a BA in Economics from the University of North Carolina and a Ph.D. in Economics from MIT.
Research Interests
Corporate finance, derivative securities and hedging, the role of asymmetric information in corporate fund-raising, application of option pricing theory to corporate decision-making
Education
- PhD, 1982, Economics, Massachusetts Institute of Technology
- BA, 1975, Economics, University of North Carolina, Highest Honors
Academic Positions
- Gaylord Freeman Distinguished Chair Professor of Fiance, Kellogg School of Management, Northwestern University, 2018-present
- Senior Associate Dean, Faculty and Research, Kellogg School of Management, Northwestern University, 2013-2016
- Erwin P. Nemmers Distinguished Professor of Finance, Kellogg School of Management, Northwestern University, 1991-2018
- Faculty senate, Finance Department representative, Kellogg School of Management, Northwestern University, 2010-2013
- Acting Director, Guthrie Center for Real Estate, Kellogg School of Management, Northwestern University, 2008-2009
- Co-director, Financial Markets Research Center, Kellogg School of Management, Northwestern University, 2006-2011
- Northwestern University Program Review Council, Kellogg School of Management, Northwestern University, 2002-2005
- Acting Director of Kellogg Computer Services, Kellogg School of Management, Northwestern University, 1993-1995
- Finance Department Chair, Kellogg School of Management, Northwestern University, 1991-1994
- Visiting Associate Professor, Graduate School of Business, University of Chicago, 1989-1990
- Associate Professor, Kellogg School of Management, Northwestern University, 1987-1991
- Assistant Professor, Kellogg School of Management, Northwestern University, 1984-1987
- Assistant Professor, School of Management, Boston University, 1981-1984
Awards
- Elected Director of the American Finance Association, 2010-2013
- Sidney J. Levy Teaching Award, Kellogg School of Management, 2006-2007, 2001-2002
Read about executive education
Cases
McDonald, Robert L. and Anna Paulson. 2015. AIG in Hindsight. Journal of Economic Perspectives. 29(2): 81-106.
The near-failure on September 16, 2008, of American International Group (AIG) was an iconic moment in the financial crisis. Large bets on real estate pushed AIG to the brink of bankruptcy. In one case, AIG used securities lending to transform insurance company assets into residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs), ultimately losing at least $21 billion and threatening the solvency of the life insurance companies. AIG also sold insurance on multi-sector CDOs, backed by real estate assets, ultimately losing more than $30 billion. These activities were apparently motivated by a belief that AIG's real estate bets would not suffer defaults and were "money good". We find that these securities have in fact suffered write-downs and that the stark "money-good" claim can be rejected.
McDonald, Robert L. and Deborah Lucas. 1998. Shareholder Heterogeneity, Adverse Selection, and Payout Policy. Journal of Financial and Quantitative Analysis. 33(2): 233-253.
When shareholders have different plans to sell their shares, they will, in general, have different preferences concerning the firm's decision to pay out cash using dividends or share repurchase. We illustrate these different preferences and explore a model of payout policy that highlights the adverse selection costs of repurchases when managers have superior information about the value of the firm. We show that, in the absence of fixed costs to repurchasing shares, there is a separating equilibrium in which managers use taxable dividends to signal the quality of the firm, with better firms paying lower dividends, using repurchases for the remainder of the payout. With fixed costs to repurchasing, small payouts are made via dividend and large payouts are divided between repurchases and dividends, as in the no-fixed cost case. In both cases, the percentage of shares repurchased increases with the size of the payout and larger repurchases are better news.
McDonald, Robert L.. 1996. Speculating on an acquisition with options: Rjr nabisco. Casenet, Southwestern Publishing.
This case provides a detailed practical example of some interesting option pricing issues arising from a tender offer for RJR Nabisco by KKR. Put-call parity was apparently violated during this period, but this was related to the specifics of the takeover offer. This case focuses on two issues: understanding the nature of the parity violation and why it could not have been arbitrated in the classical sense, and how a particular options trading strategy could have been used to speculate on the success of the KKR tender offer.
Other experts
Craig MacKinlay
Education PhD, University of Chicago, 1985; MBA, University of Chicago, 1983; MBA, University of Western Ontario, 1980; BS, University of Western Ontario, 1978 Career and Recent Professional Awards; Teaching Awards Oxford University Press Century Publication Celebration 100 Best Papers of All Tim...
Greg Beech
A qualified CA (SA), spent eight years in the investment banking industry working in mergers & acquisitions advisory at Standard Bank and then Real Africa Durolink (‘RAD’). In 1997, he started the private equity division at RAD and led the fund-raising for a new third party fund. Greg left f...
Looking for an expert?
Contact us and we'll find the best option for you.