Dissertation
ESSAYS ON CORPORATE FINANCING DECISIONS
Washington State University
Doctor of Philosophy (PhD), Washington State University
01/2021
DOI:
https://doi.org/10.7273/000005478
Handle:
https://hdl.handle.net/2376/119420
Abstract
For the first chapter of this dissertation, I exploit the staggered enactment of U.S. state-level laws protecting outside directors from shareholder lawsuits. Following the laws’ enactment, leverage ratios increase. This finding is consistent with a channel in which firms raise debt as a managerial control mechanism to counterbalance increased director protection. The documented relation is significant for firms where the control function of debt is more important, in which shareholders and takeover market participants are likely to influence managerial decisions, and that are unlikely to be constrained in financial markets. Firms increasing leverage raise dividends, decrease cash holdings, and offset the value loss stemming from reduced monitoring. For the second chapter, my coauthors and I find that product market threats measured by market fluidity increase lease financing, which is consistent with the channel that leasing tangible assets enables firms to increase their net worth when facing adverse cash flow shocks. We address endogeneity by adopting import tariff rates as an instrumental variable and additionally employing instrumented Chinese import penetration ratio as an alternate measure of product market threats. We further show that our documented positive relation between product market threats and leases is more significant for the subsamples of firms that are less financially flexible, that have lower operational flexibility, and that face lower tax rates. In further analyses, we find that firms raising leases in response to increased product market threats grow faster, which offsets profitability erosion stemming from heightened product market threats. These firms also increase leverage, a finding that complements theoretical predictions in recent literature.
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Details
- Title
- ESSAYS ON CORPORATE FINANCING DECISIONS
- Creators
- Yoonsoo Nam
- Contributors
- Douglas (DJ) Fairhurst (Advisor)
- Awarding Institution
- Washington State University
- Academic Unit
- Carson College of Business
- Theses and Dissertations
- Doctor of Philosophy (PhD), Washington State University
- Publisher
- Washington State University
- Number of pages
- 139
- Identifiers
- 99900592361301842
- Language
- English
- Resource Type
- Dissertation