Topic: Insider Investor and Information
Speaker: Lin William Cong, University of Chicago
Time: Friday, 1 September, 11:30-13:00
Place: Room 217, Guanghua Building 2
We model multi-stage financing of innovative projects where relational financiers observe entrepreneurs' experimentation and thus information they endogenously produce, before deciding on whether to continue financing. We show that entrepreneurs' optimal information productions follow threshold strategies. Insider financiers extract no rent even with full information monopoly, and projects are not efficiently financed. Independent experimentation by insiders mitigate the problem, but can be either a complement or substitute to entrepreneurs' information production. Moderate competition also facilitates information production and relationship financing. We characterize how investors' relative sophistication and competition interact to produce the non-monotone empirical patterns on relationship lending and competition. Our model allows general forms of security design, timing of experimentation and offer negotiation, and also applies to venture financing. Finally, entrepreneurs optimally issue convertible securities to sophisticated early insiders, and residual claims to outsiders.
Lin William Cong is an assistant professor of Finance and PhD advisor at the University of Chicago, and a faculty affiliate at the Center for East Asian Studies. His main research fields are dynamic corporate finance and information economics. His research interests include financial innovation and technology, real options, information and mechanism design, entrepreneurial finance, capital market imperfections, and China's economy and financial system. For his work, Cong has received the Finance Theory Group Best Paper Award, the Shmuel Kandel Award, and the Zephyr Prize for Best Paper in Corporate Finance, amongst other honors and fellowships. He was also a George Shultz Scholar at the Stanford Institute for Economic Policy Research and a Doctoral Fellow at the Stanford Institute for Innovation in Developing Economies. Additionally, his undergraduate research in physics and applied mathematics resulted in publications in a variety of science journals. Cong currently serves as an advisor for the Wall Street Blockchain Alliance (non-profit), and a member of multiple professional organizations such as the American Economic Association and the Econometric Society.
Cong earned a Ph.D. in finance and a MS in statistics from Stanford University, where he received the Gerald Lieberman Fellowship for outstanding contributions in research, teaching, and university service, and the Asian American Award for graduate leadership. He also holds dual degrees from Harvard University where he graduated top in Physics in 2009 with summa cum laude and Phi Beta Kappa, receiving an A.M. in physics, an A.B. in math & physics, a minor in economics, and a language citation in French.
Cong is a native of Shenyang, China. Outside his research and teaching, Cong practices Chinese Calligraphy, and enjoys reading, sports, cross fitness, guitar, as well as learning French and Japanese. Cong is also passionate about technological innovations, education in China and in the U.S., and integrating quantitative and fundamental approaches to investments in various asset classes, to which he first coined the term "Quantimental Investing" in 2014.
Your participation is warmly welcomed!