AbstractThis thesis consists of three essays, presented as chapters, on corporate governance. The ﬁrst chapter examines the internal corporate governance channels that focus on CEO compensation structure and the board of directors. The following two chapters study corporate governance mechanisms from an external perspective.
The ﬁrst chapter uses the employment history of over 17,000 directors of nonﬁnancial ﬁrms. It ﬁnds that boards with directors with executive experience in commercial banks compensate CEOs with higher inside debt. This ﬁnding is consistent with arguments that professional experience shapes decision making. The experience eﬀect dominates the potential conﬂict of interest eﬀect. These results are robust to several speciﬁcations addressing potential endogeneity. The increase in inside debt associated with banker-directors shifts CEOs’ incentives closer to the optimum, at which point the agency costs of outside debt are minimised to beneﬁt shareholders.
The second chapter seeks to understand how freedom of the press aﬀects corporate misconduct. The paper shows that managers engage more in accrual-based earnings management when their ﬁrms have a higher percentage of sales in countries with low media freedom. This eﬀect is stronger when foreign product markets are further away from ﬁrm headquarters, when English is not the national language of the foreign partners, or when the fraction of institutional investors is low. This chapter also shows that the insiders of these ﬁrms tend to be involved in opportunistic insider trading through buy and sell transactions. The chapter oﬀers novel insights into the economic impact of media freedom on corporations.
The third chapter explores how political uncertainty aﬀects private loan contracts by exploiting the U.S. gubernatorial elections as a source of variation in uncertainty. This chapter shows that lenders are more likely to impose ﬁnancial covenants and state-contingent pricing grids on borrowers headquartered in the states in election years, compared with oﬀ-election years. The eﬀects are stronger when the winning voting margins are small, supporting the notion that political uncertainty manifests itself in loan contracting outcomes. Additionally, the eﬀect of elections is more pronounced among the borrowers with greater information asymmetry. The evidence of this chapter suggests that gubernatorial elections increase transitory uncertainty, yielding signiﬁcant impacts on private debt contracts.
|Date of Award||23 Jan 2020|
|Supervisor||Piotr Korczak (Supervisor) & Mariano Scapin (Supervisor)|