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- Member of: ASU Electronic Theses and Dissertations
Description
I study the relation between firm debt structure and future external financing and investment. I find that greater reliance on long-term debt is associated with increased access to external financing and ability to undertake profitable investments. This contrasts with previous empirical results and theoretical predictions from the agency cost literature, but it is consistent with predictions regarding rollover risk. Furthermore, I find that firms with lower total debt (high debt capacity) have greater access to new financing and investment. Lower leverage increases future debt issues and capital expenditures, and firms do not fully rebalance by reducing the use of external financing sources such as equity. Finally, my results support the view that greater reliance on unsecured debt can increase future debt financing. Overall, my paper offers new insights into how aspects of debt structure, in particular maturity, are related ex-post to firms' ability to raise new financing and invest.
ContributorsFlynn, Sean Joseph (Author) / Tserlukevich, Yuri (Thesis advisor) / Hertzel, Mike (Committee member) / Stein, Luke (Committee member) / Arizona State University (Publisher)
Created2017
Description
I study how the density of executive labor markets affects managerial incentives and thereby firm performance. I find that U.S. executive markets are locally segmented rather than nationally integrated, and that the density of a local market provides executives with non-compensation incentives. Empirical results show that in denser labor markets, executives face stronger performance-based dismissal threats as well as better outside opportunities. These incentives result in higher firm performance in denser markets, especially when executives have longer career horizons. Using state-level variation in the enforceability of covenants not to compete, I find that the positive effects of market density on incentive alignment and firm performance are stronger in markets where executives are freer to move. This evidence further supports the argument that local labor market density works as an external incentive alignment mechanism.
ContributorsZhao, Hong, Ph.D (Author) / Hertzel, Michael (Thesis advisor) / Babenko, Ilona (Committee member) / Coles, Jeffrey (Committee member) / Stein, Luke (Committee member) / Arizona State University (Publisher)
Created2017
Description
This paper studies the relation between alignment in partisan affiliation between a firm's management team and the president and corporate investment. Survey evidence suggest that households have higher expectations of economic growth when their preferred party controls the presidency. I therefore investigate whether finance professionals, specifically corporate managers, are subject to the same partisan-based optimism and make investment decisions not based on fundamentals. Consistent with the behavior displayed by the general public, I find that managers invest more and become more optimistic about their companies' prospects when their preferred party is in power. Using insider trades, I am able to separate optimism from alternative explanations such as industry sorting of partisan managers, political connections, etc. This optimism-driven increase in investment is associated with lower profitability and stock returns. Overall, managers' partisan beliefs produce heterogeneous expectations about future cash flows and distort investment decisions.
ContributorsRice, Anthony Baird (Author) / Bates, Thomas (Thesis advisor) / Babenka, Ilona (Committee member) / Lindsey, Laura (Committee member) / Sosyura, Denis (Committee member) / Stein, Luke (Committee member) / Arizona State University (Publisher)
Created2021