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Posted 8.7.06

Weatherheadlines sat down with Professor Christa Bouwman, recipient of the Lewis-Progressive Chair in Banking and Finance, to talk about her exciting research, experiences in the classroom, and globe-trotting.

Q: Please tell us a little bit about your background. Where are you from and where did you go to school?
I was born in the Netherlands and I first went to school over there. I did my undergraduate in economics and business and I went on exchange to Cornell University. I ended up with an MBA from Cornell, and went back to the Netherlands and worked at ABN AMRO Bank for five years in various positions. At some point I realized I wanted to do something different and I decided to go for a Ph.D. in finance. I started my Ph.D. at University of Amsterdam because there was a great finance professor there whom I wanted to work with. But then I went to the University of Michigan for one semester and at that point, my advisor back home became a principal at McKinsey and someone dropped out of the Ph.D. program at Michigan, so they asked whether I wanted to transfer, which I did.

Q: What brought you to Weatherhead?
In 2005 I graduated from the University of Michigan. I was looking for a job and I interviewed at a lot of different schools. I ended up here because I was very much impressed with the school. I think Weatherhead has a great reputation and a beautiful building. Also, I think the people in the finance department are very good. In addition, there is a very good atmosphere, which is something you just sense when you’re walking around here. So I decided to come here and I’ve been very happy with my decision.

Q: What classes do you currently teach?
This coming year I’ll teach the same classes I taught last year. I’m teaching three courses: the introductory corporate finance course for undergraduates, the financial modeling / decision making course for undergraduates, and the financial modeling course for graduates.

Q: What is the best part of teaching?
Personally, I always really like it when I’m teaching something that is very hard and initially I see all these puzzled faces and I’m just hoping that at some point those faces change. And when I see that “aha” look it gives me a very good feeling.

Q: Please tell us a little bit about your current research.
I am doing two different types of research: corporate finance and banking. In corporate finance I have been working on mergers. We know there have been a lot of mergers over the past few decades. Typically mergers come in waves: we see a lot of mergers when stock markets are booming and far fewer when stock markets are not doing well. Some theories suggest that acquisitions that are undertaken when markets are booming should be worse than acquisitions that are undertaken when markets are depressed. We were interested in testing this empirically. And our findings support the theories: acquisitions that are announced when markets are booming underperform their peers in the long run, while acquisitions that are announced when markets are depressed show no underperformance.

Q: And what about your banking research?
My banking research is a little bit more technical but I am very excited about those projects too. There are several theories explaining that banks are creators of liquidity, but interestingly, we did not have any empirical measures of liquidity creation. So if you asked how much liquidity a particular bank creates or how much liquidity does the banking sector as a whole create, we could not answer it. I have been working with an economist at the Federal Reserve Board in Washington D.C., and we have constructed several measures of liquidity creation. We have applied those measures to data on US banks to learn more about which banks create liquidity and which banks destroy liquidity.

Q: Has this led to any additional research?
Yes, we’re working on a few related projects. In one project we compare liquidity creation in the US and Japan. In the 1980s, the banking sector in both countries was not doing well. In the 1990s, the US banking sector improved very rapidly while the banking sector in Japan continued to struggle. We want to see whether we can say something about why the experience in Japan and the U.S. has been so different by looking at bank liquidity creation. In another project we look at liquidity creation worldwide in close to 80 different countries.

Q: What do you like to do in your spare time?
It depends on how you define spare time. Research is actually one of my hobbies, as I tend to spend a lot of time on my research. But when I’m not doing research, I enjoy reading books, watching movies on television, going out for dinner, and weightlifting.

Q: You mentioned you enjoy reading books. Any recommendations of books you’ve recently read?
I’m currently reading a very interesting book. It’s “The Art of Happiness” by the Dalai Lama. The book focuses on what it means to be happy. It argues that happiness is a state of mind. A lot of times when you feel down, it’s because you’re focusing on other people who in one small aspect of their lives are doing better than you, and that’s a great way to feel miserable. This book has given me a lot of valuable insights and I highly recommend it.

Q: Have you taken any holidays lately?
It depends on how you define vacation! Last week I was in Washington, D.C. at the Federal Reserve Board working with my co-author. The Federal Reserve is on Constitution Avenue, so when we have lunch on the fourth floor, we overlook the Capitol Building and all the monuments. So even though I work long hours when I’m there, being in D.C. gives me a feeling of being on vacation. And a month ago, I went to a conference in Shanghai. I’d been there before, but this time I stayed a few extra days and walked around. I also took a train to Suzhou, a city that is well-known for its silk, beautiful gardens, and canals. I rented a bike there and had a wonderful time.

Q: What is a surprising fact about you that you would like to share with the Weatherhead community?
I really do like traveling, even though lately I’ve taken fewer holidays than I have in the past. All in all, I’ve visited many different countries. I’ve been to most countries in Europe, but I’ve also traveled around in China (three times – two times of which I spent a month there), Vietnam, Singapore, India, Japan, Kenya, Morocco, Mexico, Venezuela, Bolivia, Cuba, and Canada. Traveling is really great! You get on a plane and several hours later you get off a plane and the world is completely different. All the things that you’re used to are different. I love sight-seeing, but I also really enjoy simply hanging around and observing people and trying to figure out how different societies function.

Q: Anything else you’d like to add?
Just that I’m looking forward to another great year at the Weatherhead School!


 


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