Kellogg has always prided itself on its comprehensive approach to finance. Its faculty views the field in terms of its links to the broader economy, and students are taught that finance is more than a set of computational tools — it’s a logical framework with implications for strategy, policy and top-level management. The Kellogg approach has never been more relevant than it is today. In the wake of the 2008 crisis, the link between finance and economics is a subject of widespread concern. And other trends — from the rise of sovereign wealth funds to the granular study of household finance — have only reinforced the need for an interdisciplinary perspective.
“The skills we give our students are meant to serve them throughout their careers,” says Mitchell Petersen, a professor of finance at Kellogg and director of the Heizer Center for Private Equity and Venture Capital. “We can’t predict the future, of course. But we do know that a strategic, wide-lens approach to the subject leads to long-term success, and that informs the way we teach.”
In recent years, Kellogg has taken steps to bolster this approach and to build on its expertise in the field. It has hired new faculty members, fostered collaborative networks and expanded its curriculum, all with the aim of ensuring that Kellogg remains a leader in finance education in the face of rapid industry change.
Yet the department remains committed to its core vision and legacy. “It’s a combination of broad knowledge and immersion in financial decision-making,” says Torben Andersen, professor of finance at Kellogg and the current department chair. “Our research runs the gamut of economic disciplines and social sciences. But we also encourage applied learning — we don’t just teach the tools, we teach how those tools can improve one’s business strategy. We think there’s great value in that no matter how the field might change.”
A COMPREHENSIVE, COLLABORATIVE APPROACH
Nathan S. and Mary P. Sharp Professor of Finance
Department Chair of Finance
A pioneer in financial economics, Kellogg’s finance department boasts a wide range of specialties, from technical asset pricing to corporate financial policies and capital market dynamics. Its research consistently wins awards — for example, the Smith Breeden Prize for the best paper in The Journal of Finance has gone to a number of Kellogg professors, most recently Dimitris Papanikolaou, who won the prize in 2013 and 2014. Now the faculty is taking its cross-disciplinary approach even further.
“It’s always been a collaborative department,” Andersen says, “and now we are even more diverse,” with faculty engaged in fields such as economic history, sociology, industrial organization and game theory. In addition to senior macroeconomists such as Sergio Rebelo and Janice Eberly — both of whom are renowned experts in economic policy and its impact on global finance — the department has hired a number of specialists in microeconomics, including Scott Baker, Brian Melzer and Charles Nathanson.
“We have moved very strongly into what is known as applied finance,” Andersen says. “As a result of the big data revolution, we are now able to look more closely at the firm and household level: how firms choose to hire, how people save for retirement.” Kellogg has also expanded its focus to include the real estate sector. “Ever since the financial crisis, people have started to realize how important the mortgage market can be,” says Efraim Benmelech, a professor of finance and the director of the Guthrie Center for Real Estate Research, which supports studies on real estate finance and urban economics. “And the department has produced some extremely high-quality research on this subject.”
STRATEGIC FINANCE, APPLIED
In addition to reinforcing its comprehensive approach to research, the Kellogg finance department is also expanding and enriching its curriculum to address market developments, innovations and student demand. But the department’s focus on what Petersen calls “strategic finance” — as opposed to “tactical finance” — is still at the core of its teaching philosophy. “Tactical finance is all about the mechanics,” Petersen says. “How to calculate cash flow, how to price an option — this is the grammar and spelling of finance, and it’s essential for any business career. But if all you know is grammar and spelling, you can’t write the great novel — that’s where strategic finance comes in.”
Strategic finance is what helps business leaders make fundamental decisions — for example, whether to invest in a particular business, or when to enter the market — and therefore incorporates other skill sets, including marketing and strategy. “To really do finance right, you need to bring in the other disciplines,” Petersen says. “This becomes clear the moment you start to rise in an organization. The beauty of Kellogg is that we teach this way from the very beginning.”
Glen Vasel Professor of Finance
Director of the Heizer Center for Private Equity and Venture Capital
Recent curriculum changes are designed to match this core vision. For example, both Finance I and Finance II will place greater em-phasis on corporate valuation. “How to value a firm is both a financial and a strategic question,” says David Matsa, an associate professor of finance. “And how a firm is financed can tell you a lot about the business.
“We want students to develop an intuition for good financial decision making,” Matsa adds. “This means understanding the economic forces that impact firms and being able to identify the best sources of value.” Technology makes it easier to move the computational elements of finance out of the classroom, and to focus on “those ambiguous questions every business has to deal with.”
Meanwhile, new courses explore a wide range of subjects, including M&As, LBOs, and corporate restructuring; entrepreneurial finance; and venture capital. Students will also have the chance to participate in two new experiential labs — one focused on venture capital and one on buyouts. “They’ll have a chance to explore every aspect of corporate finance,” Matsa says.
At the same time, Kellogg’s curriculum is designed to offer students a logical framework they can apply to any current or future industry. “The most important skill is the ability to take an amorphous situation and ask a very precise question,” Petersen says. “Then you can gather data, reach a conclusion and make a decision. Once you have that underlying structure, you can apply it anywhere.”
WELL-ROUNDED TEAM PLAYERS
Kellogg’s curriculum changes were made in consultation with several alumni who work in the finance industry. “What Kellogg does best is teamwork,” says Jerry Kenney ’67, a senior advisor to BlackRock, a leading asset management firm. “There are very few jobs in the greater Wall Street area that don’t involve working on a team. In fact, it’s one of the cornerstones of long-term success in finance.”
Kevin Goldstein ’92, a director at KPMG, says that the value of Kellogg’s approach is that it produces well-rounded, flexible graduates. “A lot of people look back on their finance courses as some of the best,” he says. “You learn a lot more than just how to be good with spreadsheets.”
Kellogg’s finance alumni agree that, given recent industry changes, Kellogg’s curricular innovations will better equip students to face the challenges ahead. “We’re all impressed with Kellogg’s new offerings,” Goldstein says. “It’s a top-tier program, and we want the world to know about it.”
“I believe the department is second to none,” says Brian Lessig ’99, managing director at Grace Bay Ventures. “Students gain a solid foundation for understanding how everything connects in finance at the macro and micro levels, from Federal Reserve policy to global capital flows to financial decision-making. Having that broad perspective is going to help students advance their careers in finance.”NEXT: Catalyzing the network »