Essays in Financial Economics: Empirical Corporate Finance

In this thesis, I study important firm events and their interactions with the market. Chapter 1 is a joint work with Kose John, Xu Tian, and Yihan Liu. In this chapter, we analyze the market reaction to CEO turnover announcements in the presence of information frictions. We find that the market reaction to forced CEO turnover announcements is negatively related to the level of asymmetric information between a firm and its investors. No such relation exists for voluntary turnovers. We also find that in cases where information frictions are high, companies attempt to present forced turnover as voluntary and this behavior leads to a less negative market response. Overall, our results suggest that firms act strategically when disclosing information about CEO turnover to avoid a negative market reaction. Chapter 2 shows that firms in highly competitive industries can benefit from good corporate governance. I analyze the stock market reaction to CEO/chairman consolidation announcements, and find that the market reacts positively to these events if the announcing firm has strong governance within an industry of high product market competition. The benefit of CEO duality comes from efficiency gains by management, and is positively related to market competition. Only firms with strong governance can capture this benefit. Overall, my results suggest that product market competition and corporate governance are complements for firms desiring to gain managerial efficiency through granting its CEO additional power. This chapter also provides evidence against potential one-size-fits-all policies aiming to mandate the separation of CEO and chairman roles. Chapter 3 provides novel evidence of how product market competition affects firm CEO turnover decisions through unexpected tariff cuts. I find that the likelihood of CEO turnover increases with the unexpected surge in industry competitiveness. Moreover, I find that this CEO turnover effect due to tariff cuts tends to be concentrated amongst firms with weak governance, and only affects non-exporting firms. Exporting firms, on the other hand, can benefit from increased export sales due to tariff cuts and so do not generally experience a fall in CEO-firm match quality as with non-exporting firms.

Department dc:contributor.department

Economics

Year dc:date.issued

2019

Author dc:creator

• Zhang, Haofei

Advisor dc:contributor.advisor

• Mondria, Jordi

• CEO Duality
• CEO Turnover
• Corporate Governance
• Empirical Corporate Finance
• Information Friction
• Product Market Competition

Handle dc:identifier.uri

http://hdl.handle.net/1807/95993

OAI identifier oai:identifier

oai:utoronto.scholaris.ca:1807/95993