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My Ph.D.
Teaching philosophy

My research centers on topics related to corporate finance and political economy. Specifically, I seek to question the behavior of those people we never meet and who appear to be the masters of our collective destiny: politicians, bureaucrats, top managers, directors, etc. The overarching objective of my research is to analyze the impact of governance institutions, which are supposed to delimit the discretionary power of these actors, on economic performance at both state and firm level. The underlying idea is to argue that strong governance institutions are needed to reduce uncertainty and produce one of the most fundamental determinants of long-term economic performance: confidence. Hence, I turned to investigate factors that undermine confidence based on the excesses of politically connected actors, such us predatory behavior, rent-seeking activities, the misuse of entrusted power for private gain, managerial entrenchment, etc.

Corporate governance and politically connected actors

Keywords: Empirical Corporate Finance, State-Controlled Firms, The Government as a Shareholder, Payout Policy Decisions, state capitalism

My research interest is the behavior of the government as a controlling shareholder of publicly traded firms, and resulting implications for the governance and performance of state-controlled firms. Despite the largest privatization and deregulation wave in history, the governments of many countries have continued to maintain large equity positions in a great number of major public firms. Partial government control of privatized firms was expected to be transitional, a way-station on the road to liberal capitalism. Yet, the government-shareholder position seems to have become a more long-term strategy. The financial crisis prompted massive government intervention in many countries, strengthening the role of the state as a shareholder in corporate decision-making processes. I believe that the government is a fundamentally atypical shareholder and the study of its impact on corporate choices is a promising area for future research.

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Public governance and economic development

Keywords: Institutions, Institutional change and Economic Development. Confidence and Development. Economics of transition and governance.

Within this framework, we investigate the ways in which institutions and institutional change impact economic performance. We argue that economic development should be understood above all as a process of institutional transformation. According to Douglass North, institutions exist due to the uncertainties involved in human interaction. They are essentially constraints devised to reduce uncertainty by establishing a stable structure for this interaction. In consequence, they structure incentives and shape human exchange, whether political, social, or economic. In particular, they influence economic performance by their effect on the costs of exchange and production.

Institutional change shapes the way societies evolve through time and is thus a key to understanding development processes. Yet the influence of institutions on economic performance varies widely. Some economies give rise to institutions that favor growth and development by facilitating open access to both economic and political opportunities, whereas other economies develop institutions that lead to stagnation with limited access orders.

Our analysis of Arab economies from the perspective of institutional change leads us to develop a new analytical framework for explaining obstacles to development in this region. A common feature of Arab countries is that a dominant coalition of elites has a secure monopoly on violence and has divided up control of the economy, each group in the coalition receiving a share of the rents. They have limited competition and access to political and economic opportunities. This institutional framework has led to increased predatory behavior and rent-seeking activities, depriving these countries of substantial financial and human resources. The exacerbation of these practices over the last decade has eroded public confidence in governance institutions and created a general and widespread sense of injustice, which was one of the key vectors of the popular uprising in many Arab countries.  
This research was published in 2004 (in French)
Institutions de gouvernance, confiance et développement dans les pays arabes.
Éditions l’Harmattan. 2014.
With Pr. Daniel Labaronne (Université Bordeaux IV).

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Current research

Government as Dominant Shareholder and Corporate Payout Policy: Evidence from French National Champions
With Pramuan Bunkanwanicha (ESCP Europe), Clifford Holderness (Boston College), and Christophe Moussu (ESCP Europe)

This paper examines the role of the preferences of controlling shareholder in shaping corporate payout policy. We investigate the dividend policy of state-controlled firms in France during the financial crisis of 2008-2009. Using a sample of French listed firms over the 2006-09 period, we provide evidence that state-controlled firms paid more dividends than peer firms. Despite the impact of the crisis on corporate performance, state-controlled firms remain reluctant to cut dividends and show higher dividend payout compared to peer firms. This result is consistent with firms in which the state is the largest stockholder or a block stockholder. We argue that the French state is a strongly influential stockholder and uses its power to disgorge cash dividends. In the context of financial crisis and substantial increase of public debt, cash dividends are an important source of revenue for the state that can be used to reduce exploding public deficits. The main implication of our findings is that, at least in part, corporations are sensitive to the preferences and consumption needs of controlling shareholder when setting payout policy.

Consultant mission – The World Bank (2013)

Corporate Governance of State-Owned Enterprises in MENA region

The overarching objective of this project is to better understand the main systemic challenges (with a focus on transparency, accountability and economic efficiency) related to SOEs in four selected countries (Tunisia/Morocco/Egypt and Lebanon, based on a sample of companies). The survey is based on interviews in selected SOEs and in control bodies and units in charge of monitoring performance of SOEs. The project will have two main parts: (i) country level diagnostic help governments and SOEs to identify and prioritize some possible actions to improve governance ofSOEs based on a risk analysis approach. This activity should lead to develop a categorization of the main different types of SOEs.  

Working papers in progress

The state-shareholder around the world

With Pramuan Bunkanwanicha (ESCP Europe) and Clifford Holderness (Boston College)

Abstract: We use data on ownership structures of large corporations in the world to identify state control in publicly traded companies. We provide evidence that the state-shareholder has spread over the last decade. We show that, despite the largest privatization wave in the history, governments have continued to maintain large equity positions in a great number of major public firms. While the state-owned sector as a whole has been in rapid retreat, this decline is more the result of selective privatization than liberalization. Governments have tailored privatization by letting go of small companies in order to create National Champions and to promote them within a competitive environment. They have typically transferred ownership without abandoning proportional control.

Dividend payout policy and the preferences of shareholders: a literature review

Abstract: Miller and Modigliani (1961) raise the question of whether firms set policies and investors sort accordingly, or companies respond to the preferences of their current shareholders. We present a synthesis of academic research and empirical evidence consistent with the latter. Many arguments have been advanced in the literature to explain why and how the preferences of investors might affect the dividend payout choices. Our reading of the literature and the collective evidence leads us to sort these arguments into two groups: the big three (Asymmetric information, Agency costs and Taxes) and the little three (Signaling, Behavioral Influences, Clientele effects). We conclude that a simple asymmetric information framework that embeds agency costs and security valuation problems does a reasonable job of explaining the main features of observed payout policies. We argue that managerial signaling motives, clientele demands and investors’ behavioral influences have at best minor influences on payout policy, but that behavioral biases and the preferences of controlling stockholders potentially have a first-order impact.

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| Fahmi Ben Abdelkader