Essays on Corporate Finance and Governance

Abstract

In my first essay, I explain the rise of transferable managerial skills in the CEO market. I show that growing competition in the product markets is a key factor driving the increased importance of CEOs’ transferable managerial skills, specifically industry-transferable skills. To rule out the endogeneity of CEO-firm matching, I exploit the exogenous shocks of the Canada-United States Free Trade Agreement (FTA) of 1989 and the deregulatory policy in the 1990s. I show that CEOs with these skills outperform in competitive markets and are a good match for firms’ innovation-based competition strategy. In my second essay, we explain why firms in the same board-interlock networks tend to have similar corporate governance practices. Specifically, we utilize a novel instrument based on staggered adoptions of universal demand laws across states to identify causal peer effects in firms’ decisions to adopt various governance provisions. We find that a firm’s propensity to adopt these provisions increases after other firms in the same board interlock network choose to adopt similar policies. The impact of universal demand laws on the incentives faced by directors as they seek to maximize their career outcomes is a likely mechanism explaining these effects. In my third essay, I identify the effects of the gender of CEOs’ offspring on corporate performance. First, acquisitions, debt and equity offerings made by CEOs with more daughters are better received by the market. Second, CEOs with more daughters are less likely to overpay the targets, and better use newly raised capital. Third, CEOs’ daughter(s) decrease(s) corporate litigation risk. In sum, the gender of a child is arguably a random and natural experiment, which shows a clear effect on CEOs’ behavior.