THREE ESSAYS IN FINANCIAL ECONOMICS
In this dissertation, I explore three topics in financial economics focusing on how financial decision making has evolved under the various changes that surround the capital market. First, I study the potential value of big data analysis in the product market and document evidence that it may affect investors’ decision making in the capital market. Second, I focus on how changes in firms operating performance result in changes in corporate decision making and firm composition around the world. Third, I focus on how changes in managerial labor market affect corporate policies. In the first chapter, I measure the likelihood of a product review being spam using machine learning techniques and show that this likelihood contains valuable information for investors. I also document evidence that this likelihood is negatively correlated with levels of independent institutional holdings. This suggests that there exist sophisticated investors with superior information processing capabilities who can filter out noises in consumer opinions and benefit from it. However, the above significant investment value in filtering out spam reviews suggests that it is not enough to fully incorporate the information into price. In the second chapter, I document that the number of public firms with persistent operating losses has increased significantly around the world and that such firms usually hold high levels of cash. I find evidence that cash holdings in firms with operating losses are positively correlated with investment, R&D, and firm value but negatively correlated with the probability of bankruptcy and delisting from public exchanges. This finding is against the view that excessive amount of cash holdings is against investors’ interest. Rather, this means high levels of cash holdings in firms with operating losses is in investors’ interest. In the third chapter, I document the movement of executives to new jobs across industries and show that it has grown stronger in recent decades. Then, I show evidence that shift in labor market trends are strongly correlated with changes in various corporate policies. When CEOs see better future labor market opportunities, they have more incentive to perform better in their current employment. I thus argue that an active managerial labor market mitigates incentive problems under dynamic agency models.
Corporate Governance; Corporate finance; Finance; International Finance
Karolyi, George Andrew
Campello, Murillo Carneiro; Kim, Hyunseob; Yonker, Scott E.
Doctor of Philosophy
dissertation or thesis