Three Essays on Corporate Finance

This thesis comprises three essays on corporate finance. The first study investigates the impact of common ownership on executive mobility by examining how it limits competition in the labor market for top managers. Our difference-in-differences analysis exploiting S&P 500 index additions as exogenous shocks to common ownership provides evidence of a causal negative effect. The relationship is stronger when common owners are dedicated institutional investors and when executives have specialized skills and greater external job opportunities. We show that common owners tend to design compensation packages with longer vesting periods and higher stock option intensity to retain executives. They also vote in favor of proposals that increase option grants in future contracts. Our findings suggest common ownership creates friction in the executive labor market by discouraging aggressive poaching between commonly-owned firms. Our findings contribute to the ongoing debate on the anticompetitive effects of common ownership, highlighting its implications for competition policy in labor markets, particularly concerning c-suite executives. The second study examines the impact of common ownership among listed firms on startup employment. Using the Quarterly Workforce Indicators (QWI) dataset, we find a positive relationship between common ownership among locally listed firms and employment levels in startup peers within the same state-industry. This result remains robust in a difference-in-differences analysis leveraging quasi-natural experiments involving financial institution mergers. Further analysis reveals that higher common ownership increases the likelihood of corporate layoffs and deteriorating workplace conditions in the holding firms, prompting workers to seek job opportunities in nearby startups. The impact of local common ownership on startup employment varies depending on the profitability, operating costs, competitive environment of listed firms, and their approach to employee benefits. While we observe an increase in startup employment with rising local common ownership, we also find a slight decline in employee salaries and a concentration of new hires among individuals without a college degree. Overall, our findings suggest a significant labor market spillover from listed firms to local startups. Proximity to listed companies with high levels of local common ownership can provide startups with unique advantages, including greater employment opportunities and potentially lower hiring costs. The third study builds on prior research suggesting that salient stock returns attract investor attention and lead to mispricing. We show that such attention can spill over to the analyst covering these salient stocks, shaping the information environment of non-salient stocks within the analyst’s portfolio. Specifically, we demonstrate that the market reacts strongly to analyst forecast revisions for non-salient stocks when one of the stocks they cover experiences salient returns and captures investors’ attention. However, analysts subject to such attention spillovers are more prone to forecast errors and are more likely to issue herding forecasts. We further observe a reversal in the market’s response to these analyst revisions during the post-announcement period, suggesting that attention spillover from salient stocks induces investor overreaction. Moreover, the stronger the attention-grabbing characteristics of the salient stocks and the analyst’s revisions of those stocks, the more likely salience-induced attention spills over and amplifies the market’s reaction to analyst revisions of non-salient stocks. Several factors moderate the spillover effect, including the size of the analyst’s portfolio, the timing of the revision, and market sentiment.

Author dc:creator

• Liu, Yanlin

Advisors dc:contributor.advisor

• Luo, Juan
• Xu, Limin
• Zurbrugg, Ralf

• common ownership
• labor market
• startups
• employment
• stock salience
• attention spillover

Language dc:language.iso

en

Handle dc:identifier.uri

https://hdl.handle.net/2440/145190

OAI identifier oai:identifier

oai:digital.library.adelaide.edu.au:2440/145190