Essays in corporate finance: The impact of corporate governance during economic stress and tracking stock in the United States.

摘要

Chapter I - Does corporate governance make a difference in hard times? Using data from proxy statements, I investigate the impact of various firm characteristics and corporate governance measures on firm performance during a period of an exogenous economic shock. The first sample investigates the steel industry and its shock in 1990. The second sample is the hotel industry after the terrorist attacks of September 11, 2001. In the steel industry, the level of firm performance after the shock is strongly related to firm size and negatively related to the percentage of votes held by those affiliated with the firm. To assess the firm’s ability to mitigate losses when the industry is in a severe downturn, I calculate each firm’s change in performance from prior to the shock to after the shock as compared to the median industry decrease. Successful performance is positively related to the percentage of insiders on the board of directors. In the hotel industry, the level of firm performance after the shock is positively related to boards of directors of fewer than nine members and negatively related to the percentage of inside directors. When measuring the change in performance from before to after the shock, the magnitude of change is positively related to the percentage of inside directors and the existence of staggered terms for directors. The results suggest that there is a relationship between corporate governance and firm performance in hard times, though in a period of economic shock, it appears that boards of directors with significant insider participation are more successful in adapting to the changing market. These findings are consistent with prior research by Dallas (2003), suggesting the value of inside directors in enhancing the ability of the board of directors to perform its relational and strategic management roles.;Chapter II - Tracking stock from beginning to (almost) end. Tracking stock is an equity structure whereby a firm issues stock tied to the performance of a portion of the corporation rather than the entire corporate entity. Tracking stock was first used in 1985, became more popular in the 1990’s and all but disappeared by 2005. This study extends prior research by lengthening the time horizon, investigating the market microstructure effects of the abnormal returns, and examining the effects of announcement of the elimination of the tracking stock structure. The issuance of tracking stock has a positive wealth effect, with a magnitude for announcement of approximately 3% and significant over the three-day event window. The wealth effects appear to be independent of market microstructure frictions. The returns are significantly different among the types of tracking stock, which supports increased corporate focus and the reduction in asymmetric information as explanations for the abnormal return to shareholders. The execution window effect is approximately 2% and significant for reorganization tracking stock. Execution window returns are insignificant for merger tracking stock. The announcement of the elimination of tracking stock structure by returning to a single common stock for the entire corporation is not a significant wealth event for the parent firms, but evidences significant excess returns of greater than 10% for the tracking stocks over the three-day event window.