Essays on Corporate Finance

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This thesis is comprised of three chapters. In the first chapter, I exploit the 2012 French introduction of a financial transaction tax (FTT) levied on stock purchases to examine its impact on corporate investment. Investment may decrease due to the increased cost of capital. The FTT, however, may encourage investment by reducing short-termism. I find an overall positive effect of the FTT on corporate investments. I also find that the FTT causes a shift from short-term to long-term ownership, an improvement in investment sensitivity to changes in growth opportunities, and an increase in likelihood and quality of acquisitions. These results are in line with the prediction that the FTT encourages investment by inducing long-term ownership and alleviating short-termism. In the second chapter, coauthored with Beatriz Garc´ıa Osma, Anna Toldr`a-Simats and Fengzhi Zhu (UC3M), we examine whether voting requirements in M&As induce disclosure, lowering information asymmetry. We find that acquirers subject to share-holder voting provide more 8-K disclosure during the transaction period, and are more likely to provide timely disclosure of the merger agreement, information on expected synergies and post-merger earnings forecasts. For acquirers subject to voting, we docu-ment a more negative association between disclosure and bid-ask spread than in other acquirers, and a more positive association between disclosure and transient institutional sales. Lower bid-ask spread and higher transient institutional sales are associated with higher voting support and likelihood of deal completion. These results suggest that the induced disclosure is informative and it can affect voting outcomes through changing the deal valuation and the shareholder base. Evidence from falsification tests and a regression-discontinuity design supports the causal interpretation of the positive effect of shareholder voting on disclosure. In the third chapter, a joint work with Faiza Majid (UNSW), we examine the effect of tariff changes on the market for corporate assets. On the one hand, the intensified competition from foreign entry due to tariff reductions can induce firms to divest its less productive assets. On the other hand, tariff reductions can alter foreign firms’ entry mode to export instead of acquiring assets and producing locally. Using detailed information about corporate asset sales, we find that tariff changes can affect both supply and demand sides of the market for corporate assets. Our study highlights that the lower demand can limit some firms’ ability to divest assets to become more efficient. Some firms, however, are able to divest assets that are less important and less affected by the lower demand to cope with increased competition.
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