Prof. Lorenzo Bretscher

Lorenzo Bretscher is Associate 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 presented with the Nasdaq/European Finance Association Doctoral Tutorial Best Paper Award. Before his doctoral studies, he worked as an analyst at Credit Suisse for two years.

Professor Bretscher studies the book and market valuation of corporate debt and 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—in particular for distressed firms— significant discrepancies between market and book valuations. These results allow him to develop a novel market-based measure of leverage, asset returns, and financial distress and revisit several empirical conundrums revolving around corporate debt. The measure developed helps solve the credit spread puzzle in corporate bond prices and the financial distress puzzle. When estimating institutional investors' demand for corporate bonds, he discovers that insurance companies tilt their portfolios toward investment-grade, long-dated, and more illiquid bonds. At the same time, 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. From a broader perspective, this work shows that proper valuation goes a long way and that firms need to be aware that their optimal capital structure is closely linked to their investors' preferences.

• Financial Markets
  • Central Banks and Monetary Policy
  • Information and Market Efficiency
• Portfolio Management and Asset Classes
  • Asset Pricing
  • Equities
  • Fixed Income
  • Options and Other Derivatives
  • Portfolio Management
• Financial Institutions
  • Institutional Investors and Funds
  • Insurance Companies
  • Pension Funds
• Corporate Finance and Governance
  • Capital Budgeting and Investment Policy
  • Financial Risk and Risk Management
  • Financial Valuation
• Frontier Topics
  • Big Data and Fintech