Three essays on corporate finance
Date of Issue2016
College of Business (Nanyang Business School)
In essay one, we present evidence that the desire to gain human capital is an important motive for corporate acquisitions. Our tests exploit the staggered recognition of the Inevitable Disclosure Doctrine by U.S. state courts, which prevents a firm’s employees from working for other competitors. We find a significant increase in the likelihood of being acquired for firms headquartered in states that recognize such doctrine relative to firms headquartered in states that do not. Heterogeneous treatment effects confirm the human capital channel: our result is stronger for firms with greater human capital, for firms with fewer tangible assets and for firms whose employees previously could switch jobs more easily. In essay two, based on gay-friendly corporate policies as a setting, we find that catering to local community’s preference is an important driver of corporate social responsibility policies. We show that firms are more likely to have gay-friendly corporate policies when they are headquartered in states with greater gay-friendly public opinion. This positive relation is more pronounced for firms with greater human capital intensity, for firms with higher local institutional ownership, and for firms that are financially unconstrained. Furthermore, we show that a gay-friendly policy has a positive effect on firm performance when firms locate in gay-friendly states and has no such effect when firms locate elsewhere. Essay three uses a sample of 236 LBOs and 787 matching deals of U.S. public targets for the period of 1984 to 2013, and finds that LBO target shareholders receive significantly less in takeovers than shareholders of non LBO targets. The low premium cannot be explained by the difference in target or deal characteristics. After controlling acquirer, deal and target characteristics, LBO target shareholders still receive 16% less of pre-bid equity values than non LBO targets. We investigates the role of target information asymmetry in explaining the premium gap between LBO deals and matching non LBO deals, and we find as target information asymmetry measure increases by a standard deviation, the premium gap between LBOs and non LBOs widens by 5% to 10%. We also find the influence of information asymmetry on premium gap mainly happens before merger announcement, but not after merger announcement.
Nanyang Technological University