1. Statement of Research Philosophy and Interests
Max Dolinsky
Over the last five years, my academic studies and frequent interactions with esteemed faculty members
have allowed me to develop a distinct research philosophy, as well as a diverse set of research interests.
The purpose of this statement is to provide an overview of these subjects.
Research philosophy
The research philosophy that I adhere to consists of a two basic tenants.
1. Quantitative research’s pursuit of empirical evidence should begin with clear and stated theory and
should be relevant.
Casually considered, this tenant may appear somewhat obvious, common to nearly every academic’s
implied philosophy. However, even in my relatively short tenure as a dedicated researcher, I have observed
research approaches that do not begin with an articulated hypothesis and the question being addressed is
sometimes not very relevant. Instead of designing empirical tests intended to evaluate the viability of a
given theory, a broad net is cast over a range of data sources. This approach, with its apparent intent to
allow the data itself to draft the theory is not without its place in the Finance discipline. However, for a
meaningful body of knowledge to develop around a given subject, researchers must commit to ensuring
that our methods are designed to evaluate the hypotheses that we develop and address questions that are
relevant, even as this research can unfold through “long successive ages” to use the words of Seneca in his
Natural Questions.
2. Finance research should be reproducible, and therefore conducted and written with this intent.
The spirit of collaboration in research should not be limited to the interactions between concurrent
researchers. While joint studies and research relationships are integral components of a healthy academic
environment, we cannot forget that the future of the discipline hinges on our ability to clarify our objectives
and ensure that our approaches are easily replicable in subsequent studies. In doing so, we allow for two
key phenomena to occur: 1) Current researchers with potentially opposing views have the opportunity to
challenge our research findings, with the ultimate goal of producing the most tested, credible theories
possible and 2) Future researchers can build on our findings and continue advancing the state of the field.
These phenomena, taken together, admit that serious research (in nearly any discipline) requires both a
willingness to consider divergent perspectives and significant academic patience. Again, Natural Questions
provides us with a relevant perspective: “The time will come when diligent research over long periods will
bring to light things which now lie hidden. A single lifetime, even though entirely devoted to the sky, would
not be enough for the investigation of so vast a subject.”
Research Interests
My broad research interests lie in corporate financial policies and their effects on firm investment,
performance, and growth. Additionally, I am interested in investments and banking topics, particularly
those that have a corporate link. With the above research interests in mind, I have three specific research
papers related to my research interests.
In my first paper entitled “Corporate Financial Leverage: Firm vs. Industry Effects,” I find that industry
effects are an important determinant in firm financial leverage, contrary to what the literature suggests. I
2. first confirm some recent research findings on weak industry effects in corporate leverage, and I then
demonstrate that the documented weak industry effects are due in part to industry classification
measurement errors and sensitivity to sample parameters. I adopt a more accurate, variable industry
classification (TNIC3), instead of traditional fixed industry classification, and I find a substantial increase
of 40% in industry effects. Additionally, I theoretically demonstrate why the methodology previously used
in the literature is destined to find statistically weak industry effects. I conclude by running a simulation to
confirm my theory. This paper has both theoretical and empirical components, which demonstrates my
research interests and comfort with both theoretical and empirical research.
In my second research paper entitled “Firm-level Equity Market Liberalizations: Firm Investment, Growth,
and Performance” coauthored with Andy Naranjo, we examine firm-level equity market liberalizations
through their initiation of Depositary Receipts and cross-listings for 35,000 firms across 100 countries from
1985 to 2015. A fundamental question is how firms in countries with less developed financial markets are
affected by gaining access to foreign investments. In many instances, official country liberalization dates
do not coincide with the dates when firms actually gain access to foreign capital, a discrepancy which often
leads to inconclusive findings on the effects of liberalizations. Even when some researchers look at firm-
specific events such as firms being added to an emerging market index, they do not focus on the introduction
of DRs. Contributing to the prior research, we use an extensive array of unique recent data to examine the
influence of firm-level liberalization through DR introductions on firm- and country-level growth and
investment. We also examine the cross-sectional influence of country-level differences in institutional,
regulatory, political and financial development factors on firm- and country level liberalization effects. In
contrast to the mixed evidence for country-level liberalizations, we find that these firm-level equity market
liberalizations result in an increase in firm investment, growth, and performance.
Finally, as a work in progress, I am interested in exploring how commercial banks are charged by the FDIC,
especially with respect to fair insurance premiums. When I joined the Ph.D. program, I first worked with
Mark Flannery. At that time, he was working on the paper Maintaining Adequate Bank Capital, and as his
Research Assistant I dove into the study using the Ronn Verma (1986) method for inferring a firm’s asset
return volatility and asset market value. Using the inferred numbers, I estimated banks’ ideal capital
requirements. Investigating the data and my findings, I became curious about whether or not the FDIC
charges fair insurance premiums to commercial banks. Most would agree that the premiums are somewhat
arbitrary and that it is difficult for the FDIC to come up with more comprehensive and bank-specific
insurance policies in the present environment. But there have only been a few proposals on how to improve
this system. Accordingly, I began developing a theory that suggests a framework for more optimal contracts
among the saver, the bank, and the insurer. I am currently testing parts of my theoretical corresponding
predictions.
I look forward to completing these research projects, publishing them, and starting several new
collaborative projects as maintaining an active and productive research agenda is important to me.