Three Essays on Corporate Finance

Three Essays on Corporate Finance

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This set of essays investigates the intersections of corporate finance with two different subjects, firm productivity and firm life cycle theory. The first Chapter examines the relationship between firm productivity and CEO performance incentives. It looks at two measures of CEO incentives, the sensitivity of CEO wealth to share value (delta) and the sensitivity of CEO option wealth to stock return volatility (vega). It finds an inverse U-shaped relationship between productivity and delta. It also finds that greater vega generally increases productivity. However, for a range of delta values, higher vega actually reduces productivity, suggesting that stock options do not always achieve their intended effect of making CEOs less risk-averse. Chapter 2 addresses whether various board characteristics are significantly associated with firm productivity. It finds an inverse association between board size and productivity and a positive relationship between board composition and productivity, when the persistence of productivity is not controlled for. When the persistence is controlled for by using difference-GMM, the impacts of board size and board composition on productivity become insignificant, while board leadership and board shareholdings become significantly associated with productivity. In Chapter 3, it studies firms' financing behavior over life cycle stages in the context of the pecking order theory. It first classifies firms into two life cycle stages: firms in their growth stage and firms in their mature stage. According to this classification, two distinct effects on financing behavior are identified: a size effect and a maturity effect. It provides evidence showing that large firms fit the pecking order theory better than small firms---the size effect, while this size effect exists only among firms in their growth stage. For firms in their mature stage, this size effect is not significant. Overall, it finds that the pecking order theory describes the financing patterns of mature firms better than of growth firms.In this paper, we use a sample of 1109 manufacturing firms in the US during the period 1996-2005 to explore the relationship ... We then examine the relationship between TFP and board shareholdings, board size, board leadership and board anbsp;...

Title:Three Essays on Corporate Finance
Author:Zhipeng Yan
Publisher:ProQuest - 2007


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