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Naveen Khanna - Michigan State University. East Lansing, MI, US

Naveen Khanna Naveen Khanna

Professor of Finance | Michigan State University

East Lansing, MI, UNITED STATES

Khanna is the A.J. Pasant Endowed Chair Professor in Finance and Chairperson of the Finance Department.

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Full-Time MBA: Dr. Naveen Khanna - Broad College of Business at Michigan State University

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Biography

Naveen Khanna is the A.J. Pasant Endowed Chair Professor in Finance and Chairperson of the Finance Department. He came to the Broad School in 1994 after being a faculty member at the University of Michigan. In 1997, he visited the Kellogg School at Northwestern University from where he had earned his Ph.D. In 2007 and again in 2008 he visited Duke University.

Khanna's expertise includes mergers and acquisitions, insider trading, information cascades, incentive contracts, product market competition, board of directors, short selling, feedback effect of stock prices, posturing by VCs, and limits to reputation.

In 2000, he was recognized by Business Week as the "favorite faculty member", and his course, Corporate Financial Strategies, as the "most favorite course". In 2002, 2004, 2006, 2007, 2009 and 2010, he has been honored as an "Outstanding Professor" by Broad MBA students. In 2016 he was recognized by Poets and Quants as as the Favorite MBA Professor.

He is actively publishing in top Finance and Economics Journals including the Journal of Economic Theory, Rand Journal of Economics, Journal of Finance, Review of Financial Studies and Journal of Financial Economics, and is frequently invited to present his research at top universities around the country.

Industry Expertise (3)

Financial Services

Business Services

Education/Learning

Areas of Expertise (6)

Board of Directors

Optimal Contracting

Product Market Competition

Mergers and Acquisitions

Price Bubbles

Insider Trading

Accomplishments (2)

Favorite MBA Professor (professional)

Poets and Quants

Outstanding Professor (professional)

Broad MBA Community Award in 2006, 2007, 2009, 2010.

Education (3)

Panjab University: MBA

Northwestern University: PhD

St. Stephen’s College, University of Delhi: BSc

News (2)

Naveen Khanna: AT&T's Pyrrhic victory

360 Perspective  online

2018-06-20

Faculty Voice: Naveen Khanna is the A.J. Pasant Endowed Chair Professor and chairperson in the Department of Finance in the Eli Broad College of Business.

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Is Bitcoin the Next Amazon? This MSU Expert Doubts It

MSU Today  online

2017-12-15

“People are wondering whether bitcoin can be the next Amazon. That’s what the bet is. And this bet may be even bigger,” said Naveen Khanna, the Pasant Endowed Chair of Finance at MSU’s Broad College of Business.

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Journal Articles (5)

Posturing and Holdup in Innovation The Review of Financial Studies

N. Khanna and R. Mathews

2016 We show that the need to “posture” can help solve the holdup problem inherent in many multistage relationships, including those between entrepreneurs and venture capitalists. Posturing arises when an informed party needs to send a strong signal to induce skeptical third parties like employees, suppliers, customers, or competitors to develop/maintain relationships with the firm or take other actions that increase firm value. In the venture capital context, this can be credibly achieved if the VC publicly invests at high prices in later rounds. This tempers holdup by shifting ex-post bargaining power toward the entrepreneur, inducing him to exert greater effort.

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Doing Battle with Short Sellers: The Conflicted Role of Block-holders in Bear raids” Journal of Financial Economics

N. Khanna and R. Mathews

2012 If short sellers can destroy firm value by manipulating prices down, an informed blockholder has a powerful natural incentive to protect the value of his stake by trading against them. However, he also has a potentially conflicting incentive to use his information to generate trading profits. We show that a speculator can exploit this conflict and force the blockholder to buy a disproportionately large amount to prevent value destruction. This is costly for the blockholder because the trades must sometimes be executed at inflated prices. Given reasonable constraints on short sellers, a sufficiently large blockholder will have the incentive to absorb these losses and prevent a bear raid. However, conditions exist under which outside intervention may be warranted.

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Can Herding Improve Investment Decisions? Rand Journal of Economics

N. Khanna and R. Mathews

2011 Existing models show that herding in decisions can cause significant information loss, inferior information aggregation and impaired decision making. However, we show that in a multi-stage decision setting with endogenous information production, herding on the initial decision can actually result in superior aggregate information and improved decisions. This is because the possibility of herding by a follower incentivizes the leader to increase its ex-ante information production to an extent that it can dominate the information loss from herding. Examples include decisions to enter new markets, fund R&D, and provide early-stage venture capital.

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Optimal debt contracts and product market competition with exit and entry Journal of Economic Theory

N. Khanna and M. Schroder

2010 We show how competition in oligopolies, with the possibility of failure and exit of a levered incumbent, affects the ex-ante design of optimal debt contracts. When a levered firm's profits are unobservable, a debt contract imposes the threat of nonrenewal to induce truthful revelation. Because nonrenewal impacts the future profitability of the surviving competitor, the contract influences the competitor's pricing strategy and the equilibrium profits of both firms. The optimal contract is quite different from a standard debt contract, and induces the competitor to be less aggressive, resulting in higher equilibrium prices and profits, and higher returns for investors.

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Good IPOs drive in bad: Inelastic banking capacity in hot markets Review of Financial Studies

N. Khanna, T. Noe, and R. Sonti

2007 We posit that screening IPOs requires specialized labor which is in fixed supply. A sudden increase in demand for IPO financing increases the compensation of IPO screening labor. This results in reduced screening, encouraging sub-marginal firms to enter the IPO market, further fueling the demand for screening labor. The model's conclusions are consistent with empirical findings of increased underpricing during hot markets, positive correlation between issue volume and underpricing, and with tipping points between hot and cold markets. Finally, the model makes sharp predictions relating the IPO market to fundamental values of firms and to investment banking returns.

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