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It's important that actors in financial markets follow ethical practices. In her research, Loreta Rapushi looks at how firms and investors behave, and why they do what they do.

Why is your research important?

Some companies trick investors. They use complicated and legal techniques to look more profitable than they really are. This is a problem for everyone with money invested in stock markets, including pension funds and private savers.

In my research, I look at how and why companies do this.

What are some things you've found out?

Companies boost share prices so that they can make more money when they sell stocks. This is especially useful for businesses that need cash because they struggle financially.

For example, before issuing stocks, firms can sell assets (for example property or equipment) so that their earnings look abnormally high for that period. The markets react positively to this and the stock price rises. Later the stock will go back down, once the company returns to normal earnings.

Recently I also looked at ethics and corporate responsibility (CSR). Companies with good CSR performance find it easier to deal with legal troubles.

Both the chances of being sued and the cost for settling a case are higher for companies with poor CSR performance. For the same reason, companies invest more money in CSR when they’ve experienced legal troubles.

What do you want to change in business or society?

According to the investor Warren Buffet, price is what you pay, and value is what you get. I want to contribute to aligning the two, so that you get what you pay for.

What would you do for a living if you couldn't be a researcher?

If I wasn’t in academia, I would work in the banking sector. I have worked in risk management for two years before starting my PhD in Finance. That was also fun but in a different way. In the industry I was part of a team. We shared small successes with each other but those happened more often and much faster. In academia, I feel free to do research on what I like and am curious about, which I love, but on the other hand it can take years to succeed with a paper.

How do you use research to engage your students?

I am a fan of case studies, where students can apply their skills to real life situations.

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