Professor of Finance and Law and the Hans Julius Bär Chair in International Finance
Nandkumar (Nandu) Nayar, Professor of Finance and Law and the Hans Julius Bär Chair in International Finance, primarily concentrates on corporate finance, international finance, and residual value insurance research, but has lately completed several different studies on credit ratings. His work, coauthored with former doctoral student, Amy Lipton, on managerial decisions and credit ratings tries to examine whether managers consider credit ratings when making business decisions judging by measuring data on the time it took for managers to make refinancing decisions. “We are able to demonstrate in a more refined fashion that managers do care about credit ratings when they make this decision to call their bonds back,” he says.
Nayar has recently completed a study on whether unfunded pension liabilities can affect municipal credit ratings, working with economics professor, J. Richard Aronson, and former Ph.D. student, Fahad Alshatri. Nayar and his co-authors felt that previous studies had used data from too many states and municipalities, which provided inaccurate results, and chose to only examine data from Massachusetts. They found that credit ratings agencies do in fact look at unfunded pension liabilities when assigning creating ratings. Given the inconclusive findings in prior literature, their study was able to provide evidence that unfunded pension plan liabilities do indeed matter and municipalities should consider this aspect when making financial decisions.
Most recently, Nayar’ study coauthored with Steven Liedtka, on the income tax motivation for the early exercise of exchange-traded stock options is forthcoming in Advances in Taxation. Nayar wanted to investigate what makes some people exercise options early when the literature suggests that it’s best to defer the exercise until later in the period. The extant literature on option exercise rarely considers taxes, and this is the point they explored further in the research. He found that some investors may be exercising options early to maximize their after-tax profits. “Basically, taxes make people do strange things,” Nayar says. He has also recently published studies on IPO pricing, debt issuance in the face of tax loss carryforwards, and share repurchase offers.
Nayar was also an Economic Fellow in the Office of Economic Analysis’ Enforcement Division of the Securities and Exchange Commission between 2008 and 2009 where he worked on projects in fraud detection, and assessment of economic damages in securities litigation and fraud. Lehigh University recognized Nayar for his research achievements via the Beidleman Research Award in 2009.