Johan Hombert

I co-organize the HEC Paris Entrepreneurship Workshop held every year in December on the HEC Paris campus. The call for the 2025 workshop will be out this summer.

Check out my blog. Short and pedagogical articles connecting ideas from finance classes, academic research, and real-world problems.

Cap and Trade with Imperfect Hedging with Bruno Biais, Daniel Schmidt, and Pierre-Olivier Weill

In a cap-and-trade system, emitters face transition risk, due to variance in emissions caps and permit prices. We show, theoretically and empirically, that i) emitters hedge with emission permits futures bought from financials, ii) financial constraints limit hedging, in particular by limiting and delaying emitters' purchases of permits in the spot market, implying iii) permits prices are below the price of replicating portfolios of derivatives. To mitigate the adverse consequences of financial constraints, a benevolent planner reduces the variance of emissions caps. In spite of imperfections, constrained Pareto optima are implemented by appropriately designed cap-and-trade systems.

The price of emission permits in the EU has been volatile, especially since the 2018 with increasing uncertainty about climate policies.

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The Real Effects of Valuation Mistakes: Estimates from Mergers and Acquisitions with François Derrien, Alexei Ovchinnikov, and Philip Valta

Non-proportional thinking distorts merger premia and the likelihood of M&A transactions. Our reduced-form evidence and structural estimation show that investors' mistakes reduce the frequency of M&A transactions by about 8% and the value created by the M&A market by about 1%.

The figure displays the average merger premium across bins of the target's pre-offer stock price. Investors subject to non-proportional thinking ask (too) high merger premia to sell low-price targets and offer (too) low merger premia to buy high-price targets.

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Contract Completeness of Company Bylaws and Entrepreneurial Success with Paul Beaumont and Adrien Matray

Entrepreneurial success is fostered by a 2008 French reform that reduced the cost for entrepreneurs to write more complete contracts with their financiers.

Until the 2008 reform, less than 5% of new firms opted for the corporate legal form that allows firms to write complex bylaws. This share increased above 15% after the reform. We show that, by allowing entrepreneurs to write more complete contracts with investors, the reform fostered entrepreneurial success.

[Draft coming soon]

Innovation Booms, Easy Financing, and Human Capital Accumulation with Adrien Matray

Revise & Resubmit Journal of Financial Economics

The late 1990s tech bubble attracted many high-skill young workers, who initially enjoyed higher wages. In the long run, however, they end up earning 6% less than individuals who started in other sectors. The long-run wage discount is concentrated in firms that received high capital flow during the bubble.

The figure shows the earnings premium of ICT workers relative to non-ICT workers. Each color is a different cohort of workers. ICT workers who started during the late 1990s technology boom initially enjoyed an earnings premium, which turned into a discount fifteen years out.

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>> Replication package

Inter-Cohort Risk Sharing with Long-Term Guarantees: Evidence from German Participating Contracts with Axel Möhlmann and Matthias Weiss

Private implementation of inter-cohort risk sharing in German life insurance contracts. Compared to the French life insurance market analyzed in Hombert and Lyonnet (RFS 2022), long-term guarantees are higher in Germany and lean against inter-cohort risk sharing.

Life insurers use reserves to absorb shocks to the return on assets held (blue) and smooth the return paid to their customers (orange). This smoothing mechanism generates risk sharing between cohorts of investors.

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Can Risk be Shared Across Investor Cohorts? Evidence from a Popular Savings Product

with Victor Lyonnet

Review of Financial Studies, 2022

Private implementation of inter-cohort risk sharing on a large scale: savings products sold by life insurers in France transfer 0.8% of GDP across cohorts of investors every year.

Life insurers use reserves to absorb shocks to the return on assets held (red) and smooth the return paid to their customers (blue). This smoothing mechanism generates risk sharing between cohorts of investors.

[pdf] [supplementary appendix]

Incentive Constrained Risk Sharing, Segmentation, and Asset Pricing

with Bruno Biais and Pierre-Olivier Weill

American Economic Review, 2021

When imperfect asset pledgeability creates endogenous borrowing constraints, asset markets are endogenously segmented, assets trade at a discount relative to replicating portfolios of derivatives, and expected excess returns are concave in beta.

[pdf] [supplementary appendix]

Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France

with Antoinette Schoar, David Sraer and David Thesmar

Journal of Finance, 2020

Giving unemployment benefits to entrepreneurs leads to the entry of small firms which eventually grow, and fosters creative destruction.

After a 2002 French reform made entrepreneurs eligible to unemployment benefits, business creation increased by 25%. We show that the reform did not decrease the average quality and growth rate of start-ups.

[pdf] [supplementary appendix]

Anticompetitive Vertical Mergers Waves

with Jerome Pouyet and Nicolas Schutz

Journal of Industrial Economics, 2019

Vertical mergers that relax competition.

[pdf] [supplementary appendix]

Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China?

with Adrien Matray

Journal of Finance, 2018

U.S. manufacturing firms that have invested in R&D are more resilient to trade shocks.

[pdf] [supplementary appendix]

The Competitive Effect of a Bank Megamerger on Credit Supply

with Henri Fraisse and Mathias Le

Journal of Banking and Finance, 2018

A merger between two large European banks reduces credit supply to SMEs.

[pdf]

The Real Effects of Lending Relationships on Innovative Firms and Inventor Mobility

with Adrien Matray

Review of Financial Studies, 2017

Hurting lending relationships stiffles innovation and leads to reallocation of inventors across firms and across states.

[pdf] [vox summary]

News Trading and Speed

with Thierry Foucault and Ioanid Rosu

Journal of Finance, 2016

Traders who observe news faster than others have extremely volatile ("high-frequency") strategies.

[pdf] [supplementary appendix]

Equilibrium Pricing and Trading Volume under Preference Uncertainty

with Bruno Biais and Pierre-Olivier Weill

Review of Economic Studies, 2014

Asset pricing when traders make decisions under preference uncertainty, because their financial firms face challenges collecting, processing, and disseminating information.

[pdf] [supplementary appendix]

Overcoming Limits of Arbitrage: Theory and Evidence

with David Thesmar

Journal of Financial Economics, 2014

Arbitrageurs can choose their capital structure to take advantage of temporary mispricing: theory and evidence.

[pdf]

Upstream Competition between Vertically Integrated Firms

with Marc Bourreau, Jerome Pouyet and Nicolas Schutz

Journal of Industrial Economics, 2011

Competition between vertically integrated firms can fail.

[pdf] [supplementary appendix]

Does Unemployment Insurance Change the Selection into Entrepreneurship?

with Antoinette Schoar, David Sraer and David Thesmar

NBER book Measuring Entrepreneurial Businesses: Current Knowledge and Challenges, 2017

Giving unemployment benefits to entrepreneurs does not deteriorate the success potential of start-ups.

[pdf]

Antoine Hubert de Fraisse (2025) London School of Economics (Finance)

Marina Traversa (2023) Leibniz Institute - SAFE (post-doc)

Chhavi Rastogi (2022) International Finance Corporation, World Bank

Noémie Pinardon-Touati (2022) University of Columbia (Economics)

Huan Tang (2020) London School of Economics (Finance) → Wharton (Finance)