Networks Financial Institute at ISU names winning research papers in national competition

January 28, 2011

A research paper about detecting investment fraud has won a nationwide contest conducted by Networks Financial Institute (NFI) in the Scott College of Business at Indiana State University.

William Gerken, assistant professor of finance at Auburn University, won first place in the National Competition for Research Papers on Financial Services Policy Reform. Gerken received top honors for "Finding Bernie Madoff: Detecting Fraud by Investment Managers," co-authored with William Dimmock.

In their paper, Gerken and Dimmock provide strong evidence of the potential for predicting fraud before it happens, said John Tatom, director of research for NFI.

"The Securities Exchange Commission and other financial regulators will find these results very useful in monitoring and preventing fraud," he said.

Martin Goetz, financial economist for the Federal Reserve Bank of Boston, won second place with his paper, "Bank Organization, Market Structure and Risk Taking: Theory and Evidence from U.S. Commercial Banks."

Goetz's paper addresses a long-standing problem that financial and banking experts have examined, which is the effects of changes in market structure regulation on bank performance.

"Professor Goetz's paper is significant for its comprehensive statistical approach to the issue of whether, why and how market structure affects risk taking in banking," Tatom said.

Irina Telyukova, assistant professor in the department of economics at the University of California, San Diego, won third place for her paper "Home Equity Withdrawal in Retirement," which she co-authored with Makoto Nakajima.

Their paper was noteworthy for several reasons, including the paper's focus on using housing assets to manage consumer spending in retirement, which has not received much attention in literature analyzing the financial industry, Tatom said.

"The fundamental issue of managing housing assets and home equity borrowing in retirement to optimize consumer spending over the retirement years is an emerging area of concern for financial theorists, applied scientists, regulators and policymakers today," he added.

Three papers also received honorable mention. Itzak Ben-David, assistant professor of finance in the Fisher College of Business at The Ohio State University, garnered the honor for his paper, "Does Mandatory Counselor Involvement in the Mortgage Origination Process Affect Loan Choice and Performance?" Ben-David co-authored the paper with Sumit Agarwal, Gene Amromin, Souphala Chomsisengphet and Douglas D. Evanoff.

Anton Korinek, assistant professor in the department of economics at the University of Maryland, earned honorable mention for the paper, "Systemic Risk-Taking: Amplification Effects, Externalities, and Regulatory Responses." Zhen Shi, a doctoral candidate in the W.P. Carey School of Business at Arizona State University, also earned honorable mention for "The Impact of Portfolio Disclosure on Hedge Fund Performance, Fees and Flows."

First place received $15,000; second place received $10,000 and third received $5,000. The three honorable mention award recipients each received $2,500. The purpose of the competition is to encourage research on financial regulatory reform among relatively new academic researchers.

"All of the papers submitted were highly publishable, significant contributions to literature analyzing the financial services industry and had significant implications for financial services regulatory issues," Tatom said.

The authors will present their papers at a conference on "Financial Services Policy and Regulatory Reform" at Indiana State on May 16. More information is available at the website of Networks Financial Institute, which can be found at: http://www.networksfinancialinstitute.org/Pages/default.aspx.

NFI is an institute within ISU's Scott College of Business. Founded in 2003 through a grant from Lilly Endowment, Inc., NFI strives to facilitate broad, collaborative thinking, dialogue and progress in the evolving financial services marketplace, focusing on the areas of education, outreach and research.

Photo: http://isuphoto.smugmug.com/photos/1170114350_kEPbx-L.jpg (Submitted Photo)
William Gerken

Photo: http://isuphoto.smugmug.com/photos/1170114387_nxx7r-L.jpg (Submitted Photo)
Martin Goetz

Photo: http://isuphoto.smugmug.com/photos/1170114300_JY4dN-O.jpg (Submitted Photo)
Irina Telyukova

Contact: John Tatom, director of research, Networks Financial Institute, Scott College of Business, Indiana State University, 317-536-0281, ext. 712, or john.tatom@isunetworks.org.

Writer: Austin Arceo, assistant director of media relations, Office of Communications and Marketing, Indiana State University, 812-237-3790 or austin.arceo-negrich@indstate.edu.