The LSE Department of Finance is one of the largest finance groups in Europe, with strengths in most areas of theoretical and empirical asset pricing and corporate finance, as well as in financial intermediation and regulation.
Its achievements across these fields are evident in the results of the 2014 Research Excellence Framework assessment, to which it made a joint submission with the LSE Departments of Accounting and Management. An impressive 48 per cent of research included in that submission received the highest (4 star) rating, indicating that it is considered 'world-leading’; a further 38 per cent was identified as ‘internationally excellent’ (3 star). This result saw LSE ranked first in the UK for Business and Management Studies.
The Department is keenly focused on academic excellence, as well as being committed to research with wide-ranging relevance beyond academia. Visiting scholars include senior figures from global companies such as Deutsche Bank and UBS Investment Bank, and its ESRC-Systemic Risk Centre counts the Bank of England, UK Financial Conduct Authority, European Central Bank, Central Bank of Iceland, Central Bank of Luxembourg and Banque de France among its founding partners.
In addition, scholars conduct collaborative research with international financial institutions such as the New York Federal Reserve and European Central Bank, and with multi-national organisations such as the European Commission, as well as with colleagues at renowned international universities.
These links support the Department’s contribution to tackling significant contemporary challenges, including recovery from the global financial crisis. Work by Professor Dimitri Vayanos, for example, helped both provide and justify a comprehensive framework for the UK and US central banks’ huge programmes of Quantitative Easing, intended to lower long-term interest rates, make borrowing cheaper and stimulate investment.
The Department’s work has also informed efforts to prevent further crashes. Research by Dr Jon Danielsson and Professor Jean-Pierre Zigrand, highlighting risk within financial systems, has supported UK and EU legislation governing the operation of financial markets and fed into the Basel III regulations, a set of precautionary measures imposed on banks to protect the economy from future financial crises.
Beyond its use by governments and financial institutions, departmental research also informs broader policy and public discussion and debate. Professor Daniel Ferreira’s work (with Professor Renée Adams at the University of New South Wales) on relationships between corporate performance and gender diversity on corporate boards has influenced debate across Europe, particularly by challenging the belief that gender diversity is best improved through the use of quotas. This finding supported the UK Government’s decision not to impose quotas, a position now gathering support elsewhere in the EU.
Other important contributions to the REF 2014 submission included research on private equity and entrepreneurship by Associate Professor Ulf Axelson; banking by Associate Professors Daniel Paravisini and Vicente Cuñat; systemic risk by Professor Kathy Yuan; asset pricing by Professor Ian Martin; and asset management by Professors Christopher Polk, Associate Professors Amil Dasgupta and Michela Verardo, and Assistant Professor Dong Lou.
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