Matching Items (3)
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- All Subjects: Corporations--Finance.
- Creators: Bharath, Sreedhar
Description
This paper examines dealers' inventory holding periods and the associated price markups on corporate bonds from 2003 to 2010. Changes in these measures explain a large part of the time series variation in aggregate corporate bond prices. In the cross-section, holding periods and markups overshadow extant liquidity measures and have significant explanatory power for individual bond prices. Both measures shed light on the credit spread puzzle: changes in credit spread are positively correlated with changes in holding periods and markups, and a large portion of credit spread changes is explained by them. The economic effects of holding periods and markups are particularly sharp during crisis periods.
ContributorsQian, Zhiyi (Author) / Wahal, Sunil (Thesis advisor) / Bharath, Sreedhar (Committee member) / Coles, Jeffrey (Committee member) / Mehra, Rajnish (Committee member) / Arizona State University (Publisher)
Created2012
Description
Mutual monitoring in a well-structured authority system can mitigate the agency problem. I empirically examine whether the number 2 executive in a firm, if given authority, incentive, and channels for communication and influence, is able to monitor and constrain the potentially self-interested CEO. I find strong evidence that: (1) measures of the presence and extent of mutual monitoring from the No. 2 executive are positively related to future firm value (Tobin's Q); (2) the beneficial effect is more pronounced for firms with weaker corporate governance or CEO incentive alignment, with stronger incentives for the No. 2 executives to monitor, and with higher information asymmetry between the boards and the CEOs; (3) such mutual monitoring reduces the CEO's ability to pursue the "quiet life" but has no effect on "empire building;" and (4) mutual monitoring is a substitute for other governance mechanisms. The results suggest that mutual monitoring by a No. 2 executive provides checks and balances on CEO power.
ContributorsLi, Zhichuan (Author) / Coles, Jeffrey (Thesis advisor) / Hertzel, Michael (Committee member) / Bharath, Sreedhar (Committee member) / Babenko, Ilona (Committee member) / Arizona State University (Publisher)
Created2012
Description
Firms reduce investment when facing downward wage rigidity (DWR), the inability or unwillingness to adjust wages downward. I construct DWR measures and exploit staggered state-level changes in minimum wage laws as an exogenous variation in DWR to document this fact. Following a minimum wage increase, firms reduce their investment rate by 1.17 percentage points. Surprisingly, this labor market friction enhances firm value and production efficiency when firms are subject to other frictions causing overinvestment, consistent with the theory of second best. Finally, I identify increased operating leverage and aggravation of debt overhang as mechanisms by which DWR impedes investment.
ContributorsCho, DuckKi (Author) / Bharath, Sreedhar (Thesis advisor) / Hertzel, Michael (Thesis advisor) / Bessembinder, Hendrik (Committee member) / Wang, Jiaxu (Committee member) / Arizona State University (Publisher)
Created2017