Date of Degree

5-2015

Document Type

Dissertation

Degree Name

Ph.D.

Program

Business

Advisor

Jay Dahya

Subject Categories

Business

Abstract

This dissertation consists of four chapters that span international payout policy, firm- and country-level governance, and information in capital markets.

Chapter 1: This chapter tests if information gathered by investment bankers during a firm's initial public offering (IPO) creates value in a subsequent acquisition of that same firm. In a sample of 1,519 all-public acquisitions, for 54 of these acquisitions the target's IPO underwriter later becomes the acquirer's adviser. These "same adviser" acquisitions outperform, with three-day acquirer cumulative abnormal returns (CARs) that are 4% higher, all else equal. This outperformance is through both better acquisitions and better prices, and combined CARs are significantly better with little evidence that target CARs are significantly worse, although by one measure deal premiums are 13.8% lower. This effect is robust to subperiod analysis, acquirer adviser unobserved heterogeneity, and selection on both observables and unobservables.

Chapter 2: For a sample of over five million fund-firm-director-year observations across 2,226 funds, 2,150 firms, and 18,085 directors over 1997-2005, funds make larger initial investments in companies when the initial investments are coincidental with the arrival of a new director with whom the fund has a previous investment. These "follower" funds make new investments that are 5% to 30% larger than those of non-follower funds. Followed directors' previous firms outperform with respect to both operating performance and valuation, but there is little evidence that this outperformance follows directors to their new firms. These results are robust to unobserved fund, firm, and director traits, correction for within group correlation, and selection on observables and unobservables.

Chapter 3: This chapter analyzes the impact of firm- and country-level governance on corporate payout policy. For a panel of 1,828 firms across 20 countries over 2004-2008, the results are consistent with the "outcome" model of payout at both the firm- and country-level. In weak legal regimes increased firm-level governance is associated with increased dividend and total payout ratios. However, in strong legal regimes increased firm-level governance is associated with decreased dividend and total payout ratios, but substitution from rigid dividends to flexible, tax-advantaged share repurchases. With respect to payout initiation, in strong legal regimes increased firm-level governance is associated with increased probability of repurchases. These results are robust to an instrumental variable approach, alternative definitions of payout, and alternative definitions of firm- and country-level governance.

Chapter 4: For a sample of 30,071 firms, 30 countries, and 21 years there is a strong negative relation between dividends and changes in dividend taxation. Consistent with the "old view" of dividend taxation, firms alter dividend payout in response to dividend tax changes, both absolute and relative to capital gains tax rates, to reduce shareholders' tax loads. This relation is robust to both increases and decreases in dividend tax rates, defined as either shocks or continuous variation, and to both dividend payer status and dividend payout ratios. The relation is strongest in countries that afford a high level of legal shareholder protection and suggests a dividend taxation elasticity of -0.4.

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