10 minute read
Over the years, Professor Bruce D. Grundy has received numerous awards and several grants for his work as a teacher, researcher and consultant in the field of finance.
He recently joined the ANU College of Business and Economics (CBE) to focus on his research, which runs the gamut from charitable fund raising and the valuation of real options to the link between the maturity of government and corporate debt; i.e., the decision making processes of individual and corporate investments.
Bruce has been a visiting faculty member at the University of Chicago, Goethe University Frankfurt, Singapore Management University, and London Business School. He was the former Managing Editor of the International Review of Finance and an Associate Editor for a number of publications such as the Journal of Finance, Review of Financial Studies, Journal of Financial Research, Journal of Financial and Quantitative Analysis, and Accounting and Finance.
In this interview, Bruce shares why he sees markets as living organisms, the challenge of developing research topics during the COVID-19 pandemic, and why he is excited to be working at CBE.
Q. What are you looking forward to experiencing and working on at CBE?
I have always enjoyed finance and its links to the other disciplines of business and economics. After four decades as a teacher and researcher, I now want to focus purely on a set of challenging research questions on firm’s risk disclosures; the maturity of government and corporate debt; and the relation between the value effects of a cybersecurity breach and level of competition in the industry. The opportunity to move to a research-focused position at CBE has been wonderful. It is an intellectually striving College dedicated to advancing the skills of its graduates and their research. Being part of an institution with the clear goal of growing its reputation is exciting.
I am looking forward to spending my time combining research at the College’s Research School of Finance, Actuarial Studies and Statistics with visits to my grandchildren in Ireland once international travel has resumed.
Q. You’ve collaborated with academics across the world. What do you regard as some of your key research moments so far?
Finance has become increasingly specialised. I entered the field back when one attempted to know the whole field. Although I still work relatively broadly, what binds together the disparate streams of my research is seeing markets as living organisms. Some of my key past and current research collaborations are:
• Ongoing series of studies, which began 35 years ago with my thesis advisor and continued with a number of co-authors. I use the changing design of convertible bonds to demonstrate how information and taxes affect firm financing and investor portfolio decisions. These studies include work on convertibles and hedge funds as distributors of equity exposure; why conversion-forcing call announcements are associated with negative wealth effects; dividend-protected convertible bonds; and the interplay of capital supplier and security issuer preferences.
• With a colleague at Deakin University in Melbourne, I published work on the design of charitable fund-raising schemes and how corporate employee matching grant schemes can serve as coordination mechanisms to not allow more money to be raised, but also for firms to attract and retain productive, socially conscious employees, who in turn achieve higher personal utility. This can be achieved without diminishing firm profits.
• With a colleague at Alliance Manchester Business School, I am investigating whether the seemingly increasing redundancy of risk factor disclosures in financial statements is leading to a reduction in their information content. We use a textual analysis of risk factor disclosures to document a continuing strong cross-firm relation between disclosure statements and common risk metrics.
• With colleagues at University College Dublin in Ireland, I am examining the relation between industry competitiveness and the effect of cybersecurity breaches on the values of breached and non-breached firms in the same industry.
• With colleagues at Erasmus University Rotterdam in Netherlands, I am examining how interest rates on long-term government bonds can serve as reference rates that facilitate the issue of long-term corporate bonds.
The opportunity to move to a research-focused position at CBE has been wonderful. It is an intellectually striving College dedicated to advancing the skills of its graduates and their research.
Q. What advice would you give to students who will soon be graduating?
The common observation that “jobs for life have been supplanted by life-long learning” does not necessarily mean a lifetime of completing more degrees. Rather, one should read broadly and grasp changes in many fields. An actuary who designs financial products for a world in which a pandemic may drastically reduce life spans while cancer research may dramatically increase them will need to master the statistics and the finance of hedging risks associated with changes in distributions.
Importantly, the most successful graduates will be those who see the less obvious links. For instance, an aging population will not only mean more cataract surgeries, but a possibility that new glasses will come with a miniature screen built into one lens and facial recognition technology built into the other. Dreaming broadly may mean that if your employer doesn’t survive an industry consolidation, you will have already moved on in anticipation of the change that precipitated the consolidation.
Q. Can you share your insights regarding managing the lifestyle, research and teaching changes that come with COVID-19? Are there any hobbies you embraced?
While some researchers enjoy solitude, I find teaching and research to be social activities. Because I have always worked with international co-authors, Skype and Zoom at odd hours has long been the norm. Alas, the serendipity involved in finding new research topics and new co-authors over a conference dinner is challenged in a COVID-restricted world. We will come to work more closely with our immediate colleagues and I am already enjoying doing that at CBE. As to hobbies and COVID-19, I enjoy gardening. I cannot understand jogging or going to a gym when gardening allows you to exercise while creating something of beauty. The pandemic has not affected my pleasurable weekend workout.
The College is always keen to explore research collaborations with the public and private sector and to reconnect with alumni. Please get in touch if you would like to know more about partnering with us.