Nickolay M. Gantchev The Wharton School, University of Pennsylvania 2300 SHDH, 3620 Locust Walk Philadelphia, PA 19104-6367 Phone: 215-837-8288 gantchev@wharton.upenn.edu http://assets.wharton.upenn.edu/~gantchev Education The Wharton School, University of Pennsylvania Doctor of Philosophy in Finance, 2010 (expected) Thesis: The Costs of Activist Monitoring: Evidence from a Sequential Decision Model Dissertation Committee: Franklin Allen, Itay Goldstein, Luke Taylor The Carroll School of Management, Boston College Master of Business Administration, May 2002 Master of Science in Finance, August 2002 American University in Bulgaria Bachelor of Arts in Business Administration and Applied Economics, 2000 Research Interests Corporate finance, corporate governance, shareholder activism, entrepreneurial finance, financial intermediation, hedge funds, private equity and venture capital Research Papers The Costs of Activist Monitoring: Evidence from a Sequential Decision Model (Job Market Paper) I estimate the implied costs of shareholder monitoring by modeling activism as a sequential decision process, in which activists choose a more hostile tactic after less confrontational approaches fail. The sequential definition provides a more accurate description of activism and motivates a structural model, which I estimate empirically using a comprehensive hand-collected dataset of 1492 hedge fund campaigns between 2000 and 2007. I find that the average activist campaign costs $10.5 million. Half of this cost comes from the proxy stage. Initial demand negotiations are the second most expensive activist tactic, followed by board representation. I also introduce a more narrow definition of campaign success, which reduces in half the previously reported success estimates. The high costs and low success rate of activism suggest that its net gains are substantially lower than previously thought. Uncertainty and Learning in Shareholder Activism I investigate the effects of uncertainty and learning on the tactic choices and campaign outcomes in shareholder activism. I develop a dynamic Bayesian learning model, in which a risk-averse activist chooses the optimal succession of intervention tactics to maximize expected utility. I estimate the model using a unique dataset of US hedge fund activist campaigns in 2000-2007. The results confirm that learning enables activists to dramatically reduce the costs of uncertainty. Entrepreneurial Credit under Imperfect Information I explore the inefficiencies associated with entrepreneurial finance by building a model, in which projects are characterized by two-dimensional asymmetric information about both expected returns and success probabilities. I examine the investment decisions of two types of lenders – an uninformed investor who lacks knowledge of the characteristics of individual entrepreneurs, and an informed investor who can gauge the total expected return of a project. In the model, screening reduces the extent of informational asymmetry but also leads to credit market inefficiency whose direction is determined by the screening expertise of the lenders. Teaching Experience (TA) Corporate Finance (MBA Core), with Prof. Franklin Allen, 2007 - 2009 Corporate Finance (MBA Core), with Prof. Howard Kaufold, 2008 - 2009 International Financial Markets (MBA and Undergrad), with Prof. Urban Jermann, 2007 The Finance of Buyouts and Acquisitions (MBA), with Prof. Vinay Nair, 2007 Non-Academic Experience Senior Investment and Industry Research Analyst, Michelin NA, 2003 - 2005 Standard and Poor’s Corporate Value Consulting, Analyst, 2001 Completed CFA Program, 2004 Personal Information Bulgarian citizenship, F-1 Visa Thesis Committee and References Franklin Allen Nippon Life Professor of Finance and Economics Phone: 215-898-3629 Email: allenf@wharton.upenn.edu Itay Goldstein Phone: 215-746-0499 Email: itayg@wharton.upenn.edu Luke Taylor Phone: 215-898-4802 Email: luket@wharton.upenn.edu

Nickolay M. Gantchev

The Wharton School, University of Pennsylvania

2300 SHDH, 3620 Locust Walk

Philadelphia, PA 19104-6367

Phone: 215-837-8288

gantchev@wharton.upenn.edu

http://assets.wharton.upenn.edu/~gantchev

Education

The Wharton School, University of Pennsylvania

Doctor of Philosophy in Finance, 2010 (expected)

Thesis: The Costs of Activist Monitoring: Evidence from a Sequential Decision Model

Dissertation Committee: Franklin Allen, Itay Goldstein, Luke Taylor

The Carroll School of Management, Boston College

Master of Business Administration, May 2002

Master of Science in Finance, August 2002

American University in Bulgaria

Bachelor of Arts in Business Administration and Applied Economics, 2000

Research Interests

Corporate finance, corporate governance, shareholder activism, entrepreneurial finance, financial intermediation, hedge funds, private equity and venture capital

Research Papers

The Costs of Activist Monitoring: Evidence from a Sequential Decision Model

(Job Market Paper)

I estimate the implied costs of shareholder monitoring by modeling activism as a sequential decision process, in which activists choose a more hostile tactic after less confrontational approaches fail. The sequential definition provides a more accurate description of activism and motivates a structural model, which I estimate empirically using a comprehensive hand-collected dataset of 1492 hedge fund campaigns between 2000 and 2007. I find that the average activist campaign costs $10.5 million. Half of this cost comes from the proxy stage. Initial demand negotiations are the second most expensive activist tactic, followed by board representation. I also introduce a more narrow definition of campaign success, which reduces in half the previously reported success estimates. The high costs and low success rate of activism suggest that its net gains are substantially lower than previously thought.

Uncertainty and Learning in Shareholder Activism

I investigate the effects of uncertainty and learning on the tactic choices and campaign outcomes in shareholder activism. I develop a dynamic Bayesian learning model, in which a risk-averse activist chooses the optimal succession of intervention tactics to maximize expected utility. I estimate the model using a unique dataset of US hedge fund activist campaigns in 2000-2007. The results confirm that learning enables activists to dramatically reduce the costs of uncertainty.

Entrepreneurial Credit under Imperfect Information

I explore the inefficiencies associated with entrepreneurial finance by building a model, in which projects are characterized by two-dimensional asymmetric information about both expected returns and success probabilities. I examine the investment decisions of two types of lenders – an uninformed investor who lacks knowledge of the characteristics of individual entrepreneurs, and an informed investor who can gauge the total expected return of a project. In the model, screening reduces the extent of informational asymmetry but also leads to credit market inefficiency whose direction is determined by the screening expertise of the lenders.

Teaching Experience (TA)

Corporate Finance (MBA Core), with Prof. Franklin Allen, 2007 - 2009

Corporate Finance (MBA Core), with Prof. Howard Kaufold, 2008 - 2009

International Financial Markets (MBA and Undergrad), with Prof. Urban Jermann, 2007

The Finance of Buyouts and Acquisitions (MBA), with Prof. Vinay Nair, 2007

Non-Academic Experience

Senior Investment and Industry Research Analyst, Michelin NA, 2003 - 2005

Standard and Poor’s Corporate Value Consulting, Analyst, 2001

Completed CFA Program, 2004

Personal Information

Bulgarian citizenship, F-1 Visa

Thesis Committee and References