​Faculty Spotlight

Alexei Zhdanov

Alexei Zhdanov is a Professor of Finance at the Smeal College of Business, Penn State University. His research is in corporate finance, real options, and the intersection of corporate finance and asset pricing. His work has been published in leading academic journals, including the Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies, Management Science, the Review of Finance, and the Journal of Financial and Quantitative Analysis, among others, and presented at major conferences such as the AFA, WFA, EFA, SFS Cavalcade, FIRS, and the Utah Winter Finance Conference. During his 2025 sabbatical, he held visiting positions at the Tuck School of Business at Dartmouth College and at the École Polytechnique Fédérale de Lausanne in Switzerland.

One of Alexei's research agendas examines how corporate decisions affect asset prices and how mispricing in financial markets in turn affects corporate behavior. Much of this work builds on real options theory, which values a firm's opportunities to invest, grow, or default much like financial options. He finds that investors do not fully recognize this optionality: stocks whose value depends heavily on default or growth options, such as distressed, volatile, or young growth firms, are the most likely to be mispriced. In equity options, he documents specific behavioral biases of investors: they pay only partial attention to underlying stock prices, which makes options on low-priced stocks look like good deals and leaves them overpriced, and they overlook exact expiration dates, so options traded in four-week expiration cycles are overpriced relative to five-week ones. Trading on these opportunities generates significant alpha: a strategy based on his default option model, for example, earns about 11 percent per year on a risk-adjusted basis. He also studies how mispricing affects investment and default decisions, with implications for credit rating agencies, and how product market competition affects equity option prices.

A second line of his research studies the role of acquisition markets in innovation, R&D, and venture capital investment. For many young companies, being acquired is the main way founders and investors earn a return, so healthy acquisition markets matter beyond the deals themselves. His work shows that active M&A markets encourage corporate innovation, because acquisitions give innovative firms a way to monetize their ideas, and documents their importance for venture capital investment around the world.

In one ongoing project, Alexei studies how national security screening of foreign acquisitions affects the financing of innovation. Many governments now screen foreign takeovers in sensitive industries such as defense, energy, and advanced technology. Since most startups exit by selling to a larger firm, often foreign, these laws remove many of the most likely buyers. Once screening is introduced, young firms in protected industries become less likely to receive venture capital funding, and investors shift away from the youngest and riskiest startups, the very firms these policies aim to promote. As screening regimes multiply, the work identifies a real trade-off between national security and innovation financing.

A related project asks whether takeover markets amplify the mispricing of innovation. Innovation booms, from the dot-com era to the current AI cycle, combine investor disagreement, prices far above fundamentals, and surging merger activity. These forces feed each other: the prospect of being acquired at a premium inflates the perceived value of innovation, and forces firms to overinvest, further fueling a valuation bubble. This helps explain why innovation bubbles and merger waves so often arrive together.

Another ongoing project develops the first theory of “acquihires,” deals in which the buyer wants the startup's founding team rather than its products or technology, as in Google's acquisition of DeepMind. Because founders, not venture investors, capture most of the value, the lesson is cautionary: a booming market for entrepreneurial talent can eventually erode the financing on which startups depend. Alexei also develops the first economic framework for “circular deals” in the artificial intelligence industry, in which a dominant supplier of computing power, such as NVIDIA, takes an equity stake in one of its own customers, such as OpenAI. Whether these deals create value, harm competition, or feed an AI valuation bubble depends on whether computing capacity is scarce, questions at the center of current debates.

At Smeal, Alexei teaches Derivatives Markets to undergraduates, combining rigorous development of the material with applications and current market events. He previously taught Financial Management of the Business Enterprise to undergraduates and Continuous Time Finance to Ph.D. students. He also actively supervises Ph.D. and DBA students.

Alexei serves as an Associate Editor at the Journal of Corporate Finance, referees for numerous journals, and regularly serves as a discussant at finance conferences. At Smeal, he has served on multiple department committees, including the recruiting and the promotion and tenure committees.

Alexei earned his Ph.D. from the University of Rochester. Before joining Penn State, he held faculty positions at George Mason University and the University of Lausanne and Swiss Finance Institute. He also worked as a Senior Economist at Cornerstone Research, a leading economic consulting firm, and as a Portfolio Manager at PanAgora Asset Management, a quantitative equity investment firm.