Vincent Glode

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• Vincent Glode and Guillermo Ordonez (Working), Technological Progress and Rent Seeking. Abstract

  We model firms’ allocation of resources between surplus-creating (a.k.a., productive) activities and surplus-appropriating (a.k.a., rent-seeking) activities. We show that economy- or industry-wide technological progresses, such as the recent improvements in processing big data, induce a disproportionate and socially inefficient allocation of resources towards rent seeking even if most of that technology applies to productive uses. As technology improves, firms lean more on rent seeking to obtain their profits, endogenously reducing the impact of technological progress on economic progress and inflating the price of resources that are used for rent seeking and production.

• Vincent Glode and Maria Chaderina (Working), Trading with Expert Dealers. Abstract

  We jointly model investors’ allocation of order flow among over-the-counter dealers and dealers’ acquisition of expertise that increases their ability to take advantage of investors across transactions. Investors choose dealers based on their level of expertise and the liquidity they are expected to provide whereas dealers choose their level of expertise based on the number of transactions they expect to intermediate and the cost of acquiring expertise. Our model rationalizes why the most sought-after dealers often are those with the best data, technology, and skills, despite the significant adverse selection concerns triggered by their expertise.

• Vincent Glode and Xingtan Zhang (Working), Arms Sales in Financial Markets. Abstract

  Many financial transactions are of a fixed-sum nature, meaning that any improvement in the terms of trade for one party comes at the expense of another party. We model how the sales of trading advantages (e.g., data and collocation services) affect traders’ endogenous participation in a market and vice-versa. We show how the magnitude of the externality that a trading advantage imposes on counterparties impacts financial market conditions. In equilibrium, the optimal sales of trading advantages by a monopolist (e.g., data provider or a securities exchange) may result in inefficiently low levels of market participation and trade.

• Vincent Glode and Christian Opp (2023), Private Renegotiations and Government Interventions in Debt Chains, Review of Financial Studies. Abstract

  We propose a model of strategic debt renegotiation in which businesses are sequentially interconnected through their liabilities. This financing structure, which we refer to as a debt chain, gives rise to externalities, as a lender’s willingness to provide concessions to its privately-informed borrower depends on how the lender’s own liabilities are expected to be renegotiated. Our analysis reveals how government interventions that aim to prevent default waves should account for these private renegotiation incentives and their interlinkages. Our results shed light on the effectiveness of subsidies and debt reduction programs following economic shocks such as pandemics or financial crises.

• Vincent Glode, Christian Opp, Ruslan Sverchkov (2022), To Pool or Not to Pool? Security Design in OTC Markets, Journal of Financial Economics. Abstract

  We study security issuers’ decisions on whether to pool assets when facing counterparties endowed with market power, as is common in over-the-counter markets. Our analysis reveals how buyers’ market power may render the pooling of assets suboptimal — both privately and socially — in particular, when the potential gains from trade are large. Pooling assets then reduces the elasticity of trade volume in the relevant part of the payoff distribution, exacerbating the inefficient rationing associated with the exercise of buyers’ market power. Our analysis provides insight on the determinants of asset-backed securities issuance, including regulatory reforms affecting financial institutions’ liquidity.

• Vincent Glode and Christian Opp (2020), Over-the-Counter vs. Limit-Order Markets: The Role of Traders’ Expertise, Review of Financial Studies. Abstract

  Over-the-counter (OTC) markets attract substantial trading volume despite exhibiting frictions absent in centralized limit-order markets. We compare the efficiency of OTC and limit-order markets when traders’ expertise is endogenous. We show that asymmetric access to counterparties in OTC markets yields increased rents to expertise acquisition for a few well-connected core traders. When the existence of gains to trade is uncertain, traders’ higher expertise in OTC markets can improve allocative efficiency. In contrast, when expertise primarily causes adverse selection, competitive limit-order markets tend to dominate. Our model provides guidance for policymakers and empiricists evaluating the efficiency of market structures.

• Vincent Glode, Christian Opp, Xingtan Zhang (2019), On the Efficiency of Long Intermediation Chains, Journal of Financial Intermediation. Abstract

  Intermediation chains represent a common pattern of trade in over-the-counter markets. We study a classic problem impeding trade in these markets: an agent uses his market power to inefficiently screen a privately informed counterparty. We show that, generically, if efficient trade is implementable via any incentive-compatible mechanism, it is also implementable via a trading network that takes the form of a sufficiently long intermediation chain. We characterize information sets of intermediaries that ensure this striking result. Sparse trading networks featuring long intermediation chains might thus constitute an efficient market response to frictions, in which case no regulatory action is warranted.

• Vincent Glode, Christian Opp, Xingtan Zhang (2018), Voluntary Disclosure in Bilateral Transactions, Journal of Economic Theory. Abstract

  We characterize optimal voluntary disclosures by a privately informed agent facing a counterparty endowed with market power in a bilateral transaction. Although disclosures reveal some of the agent’s private information, they may increase his information rents by mitigating the counterparty’s incentives to resort to inefficient screening. We show that when disclosures are restricted to be ex post verifiable, the informed agent optimally designs a disclosure plan that is partial and that implements socially efficient trade in equilibrium. Our results shed light on the conditions necessary for asymmetric information to impede trade and the determinants of disclosures’ coarseness.

• Vincent Glode and Richard Lowery (2016), Compensating Financial Experts, Journal of Finance. Abstract

  We propose a labor market model in which financial firms compete for a scarce supply of workers who can be employed as either bankers or traders. While hiring bankers helps create a surplus that can be split between a firm and its trading counterparties, hiring traders helps the firm appropriate a greater share of that surplus away from its counterparties. Firms bid defensively for workers bound to become traders, who then earn more than bankers. As counterparties employ more traders, the benefit of employing bankers decreases. The model sheds light on the historical evolution of compensation in finance.

• Qi Chen, Joseph Gerakos, Vincent Glode, Daniel Taylor (2016), Thoughts on the Divide between Theoretical and Empirical Research in Accounting, Journal of Financial Reporting.
• All Research from Vincent Glode »

Current Courses

• FNCE2070 - Valuation

  The focus of this course is on the valuation of companies. The course covers current conceptual and theoretical valuation frameworks and translates those frameworks into practical approaches for valuing companies. The relevant accounting topics and the appropriate finance theory are integrated to show how to implement the valuation frameworks discussed on a step-by-step basis. The course teaches how to develop the required information for valuing companies from financial statements and other information sources in a real-world setting. Topics covered in depth include discounted cash flow techniques and price multiples. In addition, the course covers other valuation techniques.

  FNCE2070001 ( Syllabus )

  FNCE2070002 ( Syllabus )

Past Courses

• FNCE2070 - Valuation

  The focus of this course is on the valuation of companies. The course covers current conceptual and theoretical valuation frameworks and translates those frameworks into practical approaches for valuing companies. The relevant accounting topics and the appropriate finance theory are integrated to show how to implement the valuation frameworks discussed on a step-by-step basis. The course teaches how to develop the required information for valuing companies from financial statements and other information sources in a real-world setting. Topics covered in depth include discounted cash flow techniques and price multiples. In addition, the course covers other valuation techniques.

• FNCE9230 - Fin Econ Under Imp Info

  This course covers general equilibrium and rational expectations, foundations of the theory of information; learning from prices in rational expectations equilibrium models, moral hazard, adverse selection, and signaling bidding theories.

• Wharton Teaching Excellence Award, 2020
• Wharton Teaching Excellence Award, 2019
• Wharton Teaching Excellence Award, 2018
• Finalist for Anvil Award for Outstanding Teaching, Wharton MBA Program, 2017
• Excellence in Teaching Award, Undergraduate Division at the Wharton School, 2017
• Best Paper Award, 12th Annual Conference in Financial Economics at IDC-Herzliya, 2015
• Cynthia and Bennett Golub Faculty Scholar Award, 2012
• Terker Family Prize in Financial Research [2nd prize], 2010
• Best Paper Award in Capital Markets, Northern Finance Association meeting, 2008
• Best Paper Award in Investments, Financial Management Association meeting, 2007

Knowledge @ Wharton

• College Football Playoffs with Bill Connelly, Knowledge @ Wharton - 01/08/2025
• The Real Estate Market Survived Until 2025. What’s Next?, Knowledge @ Wharton - 01/07/2025
• AI in 2025: What Challenges Lie Ahead?, Knowledge @ Wharton - 01/07/2025
• Jeremy Siegel: 2025 Outlook for Stocks and the Economy, Knowledge @ Wharton - 01/07/2025
• What’s Ahead for Real Estate in 2025?, Knowledge @ Wharton - 01/07/2025
• Confidence in Cryptocurrency | David Reibstein and John Zhang (Part 1), Knowledge @ Wharton - 01/07/2025
• What’s Ahead for the Economy in 2025, Knowledge @ Wharton - 01/06/2025
• How Did AI Grow in 2024 and What’s in Store for 2025?, Knowledge @ Wharton - 01/02/2025
• NFL Data Science with Tom Bliss, Knowledge @ Wharton - 12/25/2024
• Overwhelmed by Too Many Choices When Shopping? Wharton Retail Expert Weighs In, Knowledge @ Wharton - 12/19/2024