Top Prize for Research on Corporate Finance Goes to Wisconsin Professor

July 10, 2006

Toni M. Whited, an associate professor of finance at the University of Wisconsin-Madison School of Business, co-authored the best paper on corporate finance published in the Journal of Finance in 2005.

Whited and Christopher A. Hennessy of the University of California-Berkeley won the prestigious Brattle Prize in Corporate Finance and $10,000 for their paper, "Debt Dynamics." In the paper, they explore in a realistic, dynamic setting the effects of taxes and growth on corporate capital structure. The award was presented at the annual meeting of The American Finance Association, publisher of the Journal of Finance, in February.

"This is a tremendous accomplishment for Professor Whited and a great reflection on the quality of research at the School of Business," said School of Business Dean Michael M. Knetter. "Only the best research is published in the Journal of Finance. Being cited for the best paper on corporate finance to appear in the journal all of last year is an outstanding accomplishment."

Whited, who joined the School of Business in 2003, is the Kuechenmeister-Bascom Professor in Business in the department of finance, investment and banking. She earned her doctoral and master's degrees, both in economics, from Princeton University. Prior to earning her Ph.D., she was an economist for the Board of Governors of the Federal Reserve System. Her areas of expertise include corporate diversification, liquidity constraints and measurement error.

Whited said the aim of the paper was to explain "seemingly anomalous corporate capital structure decisions in a unified, rational framework. Our theory breaks from previous work because it explicitly takes account of managers' simultaneous desires to minimize taxes and to plan for future financial flexibility and growth. It also does a good job of explaining the data."