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Date of Award
Olin Business School
Doctor of Philosophy (PhD)
This dissertation consists of three papers in corporate finance. Chapter 1 studies how mergers affect client relationship, using evidence from the investment banking industry. Our finding suggests that issuers, especially small ones, choose relationship underwriters to capitalize on relationship-specific assets and reduce the degree of underpricing. Bank mergers result in loss of relationship-specific capital, making the post-merger banks less attractive to the pre-merger banks relationship clients. The loss of relationship capital following bank mergers also results in more underpricing, especially for small issuers. Chapter 2 examine an important factor underlying the cross-sectional variation in CEO Pay-Performance Sensitivity(PPS): investor-manager disagreement. I characterize the optimal PPS when investors and managers have heterogeneous priors, and those priors affect project investment decisions, even under symmetric information. With a large sample, I find strong empirical evidence that CEO pay-performance sensitivity is decreasing with perceived investor-manager disagreement, and the magnitude of the association is economically important. Chapter 3 investigates the causal effects of involuntary delisting from a stock exchange on stock liquidity and long-term firm value. Focusing on firms in violation of NASDAQ continued listing rules between 2000 and 2009, I compare firms eventually delisted and moved trading of its stocks to Over-The-Counter (OTC) markets and those regained compliance and remained on NASDAQ. Market volatility during the delisting grace period is used as an instrumental variable (IV) for delisting outcome. My findings suggest large and negative delisting effect on trading volumes and the firms future access to public equity market; However, once selection is addressed, delisted stocks are no longer associated with higher transaction costs, lower analyst coverage or institutional ownership. My findings also suggest large cross-sectional difference based on a stocks pre-event trading volume: leaving NASDAQ for the OTC markets appear to be costly for previously actively-traded stocks but not the thinly-traded ones.
Chair and Committee
Anjan Radhakrishnan V. Thakor Gopalan
Xiumin Martin, Mark Leary, John Nachbar,
Liu, Karen, "Essays in Corporate Finance" (2016). Arts & Sciences Electronic Theses and Dissertations. 813.
Available for download on Friday, May 15, 2116