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Interview with Arturo Bris

Is there any research in Corporate Finance being done in Spain?

Yes, plenty of it and of a very high quality. As opposed to the United States, where Finance Departments have always existed within business schools, in Spain, “Corporate Finance” research has arisen mainly from the Economic Theory and Business Economics departments. A few years ago, theoretical projects were more frequent than empirical studies, mainly due to the scarcity of databases from which to work. Today, Spain has excellent data sources, without losing its appetite for theoretical research for which Spanish Universities stand out. We have institutions such as CEMFI, the University of Pompeu Fabra, the University of Carlos III, the IESE, and many others which generate research projects which are published in the best international journals.

What have been the most common research topics in recent years?

Economic Theory is based on the assumption that markets are perfect and market agents are rational; in recent years, we have seen that neither is true. This is why researchers have focused on the effect of the frictions arising in financing decisions. A good example is that of emerging markets, where there are liquidity and information problems. Another field of enormous projection is that of Behavioural Finance, which studies the effect that the psychological tendencies of investors have on investment decisions. For example, Behavioural Finance attempts to explain why investors prefer to lose five euros twice than ten euros once. From a traditional finance point of view, this behaviour is not “rational” and therefore was not considered feasible. Finally, the internationalisation of financial markets has had an important impact on research. There are numerous researchers dedicated to areas such as corporate governance and financial regulation.

What impact does Corporate Finance research have on the “real” world?

An advantage of being a financial researcher is that the financial community comes to us to solve their conceptual problems. There are probably very few fields in which the impact of academics is higher. The Theory of Financial Structure, the design of dividend policy, information problems, the valuation methods derived assets, optimum financial regulation, are examples of problems analysed and resolved by academics, whose solutions have been put into practice in the real world. This gives us three advantages. Firstly, a large part of research projects are financed by corporations, at least in the United States. Secondly, academic and business life are two possible alternatives for new postgraduates and Ph.D.s in Finance, which encourages many graduates to want to be active in this field. Major investment banks often turn to University professors to cover positions of responsibility. Finally, there is a close relationship between the University and the company; the real world poses problems that the researchers try to solve.

Your joint paper submitted with Christos Cabolis won the Jaime Fernández de Araoz Award in its first edition. What would you highlight about the Prize and its impact?

On a personal level, the Jaime Fernández de Araoz Award has been one of the best experiences of my life. Firstly, because it gave me the opportunity to get to know an extraordinary family who treated Christos, myself and our families extraordinarily well. Secondly, because it has allowed me to meet personally Their Royal Highnesses the Prince and Princess of Asturias, something that I will never forget. Finally, because in our profession, gaining public recognition is something that is rare, especially in your own country.

Was your winning paper an empirical study about the impact of rules of good governance. Is there good governance in the Spanish company?

The rules of Good Governance refer to the control that shareholders of companies should exercise over the executives so that they do not endanger their investment. An example is the independent advisors on the board of directors, or the possibility of criminally sueing directors for fraud. In Spain a profound legal reform is being carried out, but the most worrying enigma is if it will have a practical effect on the running of companies. Firstly, because this reform is based on the importing of rules from other countries, but here the problems are very specific. Secondly, because when regulations try to impose limits on the discretion of directors it is taking into account the opinion of the directors to a greater degree than that of the shareholders.

Do you think more importance should be given to financial research in Spain?

Educational policies try to promote research, but the concept of research in Spain is focused around research in experimental sciences. A researcher for the general public is a person who dresses in a white coat and works with a microscope. It is a profession which does not have the social recognition that it does in other countries. This is why the Jaime Fernández de Araoz Award is such a praiseworthy initiative. Finally, a problem with which we have to live with is that financial research is not a social priority, it is obvious that cancer research is more important, for example, than research into the repurchase of share.