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Paola Sapienza

Donald C. Clark/HSBC Chair in Consumer Finance, Professor of Finance at Kellogg School of Management

Schools

  • Kellogg School of Management

Expertise

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Biography

Kellogg School of Management

Paola Sapienza is the Donald C. Clark/HSBC Chair in Consumer Finance Professor at the Kellogg School of Management. She also serves as a faculty research fellow in the National Bureau of Economic Research's program on corporate finance and political economy, and has previously served as a faculty fellow in the former Zell Center for Risk Research, a research affiliate of the Center for Economic Policy Research.

Sapienza's areas of expertise include banking and financial institutions, behavioral economics, behavioral finance, corporate finance, emerging markets and regulation of financial markets, private equity and venture capital. Sapienza has written articles on banking, social capital, trust and financial development. Her work has been published in such journals as the American Economic Review, the Quarterly Journal of Economics, the Journal of Finance, the Journal of Financial Economics, and Science. She has been featured in the Thompson Reuter's list of most influential scientific minds in 2014 and 2015. She holds a teaching affiliation with the Kellogg School's Heizer Center for Private Equity and Venture Capital. Professor Sapienza has been an Associate Editor at the Journal of Economic Perspectives, Management Science, and the Journal of Finance. She was elected director of the American Finance Association in 2011 for a three year term. She serves on the board of the Academuc Female Finance Committee (AFFECT).

Prior to joining Kellogg, Sapienza worked as an economist in the research department of Bank of Italy. She received a bachelor's degree in economics from Bocconi University, and an MA and PhD in Economics from Harvard University.

Professor Sapienza was an independent board member of Assicurazioni Generali SpA, a publicly listed insurer, from April 2010 to May 2019. During this period, she was also a member of the investment and strategic committee, the audit and risk committee.

Research Interests

Financial development, financial institutions, political economy, behavioral economics

Education

  • PhD, 1998, Economics, Harvard University
  • MA, 1993, Economics, Harvard University
  • Bachelor in Economics (Laurea), 1989, Economics, Bocconi University, Summa Cum Laude

Academic Positions

  • Professor, Finance, Kellogg School of Management, Northwestern University, 2009-present
  • Faculty Affiliate, International Organizations & International Law (IO/IL) Working Group, Buffett Center for International and Comparative Studies, Northwestern University, 2008-present
  • Research Fellow, Centre for Economic Policy Research, 2007-present
  • Research Associate, National Bureau of Economic Research, 2007-present
  • Faculty Fellow, Zell Center for Risk Research, Northwestern University, 2006-present
  • Faculty Affiliate, Roberta Buffett Center for International and Comparative Studies, Northwestern University, 2001-present
  • Faculty Fellow, Center for International Economics and Development, Northwestern University, 2000-present
  • Visiting Fellow, GSB Initiative on Global Markets, University of Chicago, 2009-2009
  • Ford Visiting Associate Professor, Finance, Booth School of Business, University of Chicago, 2008-2009
  • Associate Professor, Finance, Kellogg School of Management, Northwestern University, 2006-2009
  • Faculty Research Fellow, National Bureau of Economic Research, 1999-2007
  • Research Affiliate, Centre for Economic Policy Research, 1998-2007
  • Assistant Professor, Finance, Kellogg School of Management, Northwestern University, 1998-2006

Awards

  • Appointed Fellow of the European Corporate Governance Institute (ECGI), European Corporate Governance Institute (ECGI), permanent
  • 2020 Russel Sage Presidential Award for Diversity in School: Immigrants and the Educational Performance of US-born Students", Russell Sage Foundation, 2020-2022
  • 2020 Russel Sage Presidential Award for Diversity in School: Immigrants and the Educational Performance of US-born Students", Russell Sage Foundation, 3 years
  • 2018 Hicks-Tinbergen Award Please link the prize motivations: https://www.eeassoc.org/index.php?page=26, The European Economic Association
  • 2018 Highly Cited Researchers by Clarivate Analytics Web of Science https://hcr.clarivate.com/, Web of Science
  • Thompson Reuter/Clarivate list of the Most Influential Scientific Minds, 2014, 2015, 2016, 2014, 2015, 2016 consecutive years
  • Elected Director of the American Finance Association, American Finance Association, 2012-2014
  • Smith Breeden Distinguished Paper Award, Journal of Finance, 2009

Videos

Read about executive education

Cases

Guiso, Luigi, Paola Sapienza and Luigi Zingales. 2006. Does Culture Affect Economic Outcomes?. Journal of Economic Perspectives. 20(2): 23-48.

Economists have been reluctant to rely on culture as a possible determinant of economic phenomena. The notion of culture is so broad and the channels through which it can enter the economic discourse so vague that it is difficult to design testable hypotheses. In this paper we show this does need to be the case. We introduce a narrower definition of culture that allows for a simple methodology to develop and test cultural-based explanations. We also present several applications of this methodology: from the choice to become entrepreneur to that of how much to save, to end with the political decision on income redistribution.

Sapienza, Paola. 2002. The Effects of Banking Mergers on Loan Contracts. Journal of Finance. 57(1): 329-367.

This paper studies the effects of banking mergers on individual loan borrowers. Using information on individual loan contracts between banks and companies, I analyze the consequences of banking consolidation on banks' credit policies. I find that (i) in-market mergers are beneficial to borrowers if these mergers involve the acquisition of banks with small market shares. In these cases, interest rates charged by the consolidated banks decrease, consistently with the view that horizontal mergers generate efficiency gains. However, as the local market share of the acquired bank increases, the efficiency effect is offset by market power; (ii) mergers have different distributional effects across borrowers of different sizes; (iii) small borrowers of target banks are less likely to borrow in the future from the consolidated bank than borrowers of similar banks not involved in mergers. The decision to deny credit to small borrowers does not seem to be based on the quality of the borrower, confirming potential adverse welfare effects of the banking consolidation on the availability of credit to small businesses.

Sapienza, Paola, Vineet Bhagwat and Apaar Kasliwal. 2012. Surya Tutoring: Evaluating a Growth Equity Deal in India. Case 5-312-501 (KEL679).

The case focuses on two major challenges in deal making in emerging market economies—deal sourcing and negotiation—by focusing on a real (but disguised) Indian private equity deal. In 2010 Surya Tutoring was a fast-growing tutoring academy for high school students aspiring to gain admission to the prestigious Indian Institute of Technology (IIT). Surya’s CEO, R. K. Sharma, wanted to expand its reach beyond Kota (a city of 1 million people in the northern state of Rajasthan), which had become the center of the IIT prep school industry and home to tens of thousands of students studying for the rigorous IIT entrance exam. Sharma knew there was vast untapped potential in the teeming Indian metropolises of Mumbai, Chennai, Delhi, and Bangalore, as well as in foreign markets such as Dubai and Australia.

Sharma had received term sheets from two private equity firms willing to finance Surya’s expansion. By the end of the month he needed to decide which to accept: the offer from big bulge bracket fund Blackgem, or the one from ZenCap, a small Indian firm based in Mumbai with which he had become intimately familiar during the past year.

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