Paul P. Momtaz

Paul P. Momtaz

Blog posts

2023

The economic costs of the Russia-Ukraine conflict in terms of lost entrepreneurship

3 minute read

Published at: R&D Today

The common belief that wars can be good for the economy is a myth; empirical evidence shows consistently that war negatively affects GDP per capita, argue Hanna Motuzenko and Paul Momtaz, co-authors of a new paper analysing the economic impact of the conflict in Ukraine. There are many ways that war reduces GDP per capita, including trade disruptions, human capital losses, physical capital destruction, technological regress, political instability, and more general uncertainty – it also impacts entrepreneurial activity. In this post Hanna and Paul provide insights into the findings of the paper. Read more

Less academic freedom leads to less innovation

7 minute read

Published at: London School of Economics: Impact Blog

Drawing on data showing a decline in academic freedom over the past decade, David Audretsch, Christian Fisch, Chiara Franzoni, Paul P. Momtaz and Silvio Vismara, analyse the relation of academic freedom to technological innovation, as represented by patents, finding a quantifiable causal link between reduced academic freedom to lower levels of innovation. Read more

Academic Freedom May Lead to Economic Growth through Innovation

2 minute read

Published at: Academe Blog

Academic freedom matters for many reasons. Our new study that is available for free download at SSRN empirically shows that academic freedom can be related to economic growth through more innovation. Examining 157 countries over the 1900–2015 period, the study concludes that academic freedom is associated with more patents filed (a quantity measure for innovation) and more forward citations per granted patent (a quality measure for innovation). Given that academic freedom has declined in the last decade for the first time since 1900, and the decline is particularly pronounced in innovation-intensive countries, the findings suggest that the decline in academic freedom slows down economic growth. Read more

2022

Decentralized Finance, Crypto Funds, and Value Creation in Tokenized Firms

4 minute read

Published at: Columbia Law School Blue Sky Blog

Decentralized Finance (DeFi) employs blockchain technology and smart contracts with the goal of enabling perfectly disintermediated financial markets. Despite the far-reaching ambition, DeFi markets are experiencing increasing intermediation recently, as a new type of intermediary, so-called Crypto Funds (henceforth, CFs), reintroduces centralized market structures. In fact, the number of newly established active CFs has substantially grown over the last four years to more than 850 at the end of 2021, with a surge in total assets under management from $8.3 billion in mid-2018 to $57.5 billion in 2021. In a new article, we address the question of why CFs find it profitable to intermediate DeFi markets and whether CFs contribute to the overall efficiency of those markets. Read more

Decentralized Finance and Crypto Funds

5 minute read

Published at: Duke Law School FinReg Blog

Decentralized fundraising through Initial Coin Offerings (ICOs) for early-stage ventures is one important new business model that has only become viable through blockchain technology and smart contracts. Utility tokens, voucher-like assets providing access to a service or product that a venture promises to provide in the future, are generally considered as perfectly disintermediated peer-to-peer transactions, thus representing a prime example for decentralized finance (DeFi). Traditional venture fundraising involves substantial frictions, because many investors only trust and invest in projects with strong network ties. ICOs, as a form of token-based crowdfunding, allow startup ventures to raise funds in a trustless way from previously unknown investors across the globe. Read more

Financing Sustainable Entrepreneurship

4 minute read

Published at: Columbia Law School

The key take-away for policymakers is simple: ESG-oriented entrepreneurs will help make our society more sustainable for their own sake. If one wants to accelerate this evolution, the best way is through policies that encourage investments in startups. Read more

2021

The Economics of Crypto Funds

4 minute read

Published at: Columbia Law School

Crypto funds are a new financial intermediary that trade in cryptographically protected digital assets, known as coins or tokens. Both the number of crypto funds and investments in crypto funds are soaring. As of the second quarter of 2021, more than 800 crypto funds are active, and their aggregate assets under management exceed USD 60 billion. The trend is likely to continue, as crypto funds returned an average of 98 percent (before fees) to their investors in the first quarter of 2021. Crypto funds differ from more traditionally-managed funds in significant ways. For example, CryptoFundResearch reports that 43 percent of all crypto funds do not have physical offices and instead rely on globally distributed teams. Crypto funds largely operate in a legal gray area because they mostly trade in coins that are classified as non-securities. This feature largely exempts them from many regulations, such as the Investment Company Act and the Advisers Act. As a consequence, they face fewer regulatory restrictions, which helps set them apart from more traditionally-managed funds. For example, crypto funds are not required to restrict their fundraising to qualified or accredited investors, which enables them to raise funds from relatively small investors as well (the crypto fund industry has set the median minimum investment requirement at around USD 100,000). Similarly, there is no applicable regulation that prescribes the management and performance fees crypto funds may charge their investors. The flip side of a lack of regulation is that crypto funds disclose little information, and hence there is no systematic empirical evidence on the performance of this important new intermediary. To fill this void, we compiled a unique dataset from various sources that track crypto fund activity and performance over the last four years. Our paper is the first to examine the economics of crypto funds. Read more

Does it pay to invest in sustainable startups?

3 minute read

Published at: Duke Law School

Sustainable investing (or impact investing) is arguably the hottest topic in global finance. However, the economics of sustainable investing are contentious among practitioners and academics. While many industry reports point to the high net capital inflows and favorable valuations of ESG assets, financial economists warn that the sustainable investing hype could be driven by an unsustainable demand effect. The current focus on ESG could result in these assets underperforming once the high net capital inflows begin to subside (and other unsustainable effects, such as “greenwashing,” start to wear out). In line with the above skepticism, Schumpeterian economists argue that society will only transition to become more sustainable if new, more sustainable businesses disrupt incumbents via the dynamics of “creative destruction.” However, the same Schumpeterian economists have yet to answer the question of how to finance ESG-oriented creative destruction. The problem at the core of the debate is that sustainability-oriented startups face several additional constraints without being able to fully appropriate all the positive externalities from the good that they do. Read more

“Never again” (or not?) — The European bail-in regime has yet to solve the systemic problem of implicit government guarantees

2 minute read

Published at: Oxford Business Law Blog

“Never again” was the impassioned conviction of governments worldwide after being forced to bail out banking institutions and provide guarantees and capital to avert systemic collapse as a result of the global financial crisis of 2007/08. Since then, the responsible international regulatory bodies have developed a slew of new regulations, including enhanced supervision, capital surcharges, and resolution regimes specifically for banks that would jeopardize the financial system if they were to fail. But is this bail-in regime credible? Read more

A Law and Economics Analysis of the European Takeover Directive: What about Enforcement?

5 minute read

Published at: Oxford Business Law Blog

A vast literature studies the role of institutions, such as regulation, for economic outcomes. An implicit assumption in many theoretical and empirical studies in the field is that the law is perfectly enforceable. However, in practice, most of the time this is not the case. The law may not be perfectly enforceable for several reasons. One reason is that enforcers may be capacity-constrained and therefore cannot prosecute each case. Another reason is that the costs of enforcement are too high to motivate economic agents to insist on their rights. There is another ‘European-specific’ reason for imperfect enforcement: European member states, which are obliged to transpose EU-level directives into national laws, often have considerable discretion over the design and scope of their enforcing bodies within their jurisdictions, which they may use to conserve or increase their competitive advantage. Read more

2020

How Merger Control Impedes an Efficient Market for Corporate Control

3 minute read

Published at: Oxford Business Law Blog

Recent deliberations among antitrust enforcers about the pros and cons of breaking up BigTech have put the effectiveness of competition policy center stage. In our recent article in the Journal of Corporate Finance, we shed novel light on some unintended consequences of competition policy. Specifically, the article shows that, while attempting to prevent anti-competitive business combinations, an unintended and harmful byproduct of European merger control is that it impedes an efficient market for corporate control. Read more

Do Institutional Investors Prevent The Market For Tokenized Assets From Failing?

3 minute read

Published at: Duke Law School FinReg Blog

Given the absence of an institutional framework for the ICO market that could effectively mitigate the moral hazard in signaling, we ask, in a recent Journal of Corporate Finance publication, whether the ICO market is able to efficiently cope with this problem on its own. Specifically, we study whether institutional investors, such as Venture Capital (VC) funds, can extract economic rents associated with market-wide services such as rigorous due diligence and certification of high-quality start-ups. Read more

How do CEO emotions impact firm value?

3 minute read

Published at: Strategic Management Society (SMS) Blog

Why are CEOs coached for many hours in preparation for important public announcements, such as their presentations at annual meetings? The extensive preparation is because CEOs know that shareholders, the media, and other stakeholders will pay close attention not only to what they present but to how they present. How CEOs are perceived when they confer information may provide important clues as to how CEOs interpret the information themselves. Read more

2019