Three essays in corporate finance
I focus on two areas of research for this dissertation. First, I look at incentives alignment, particularly of CEOs. Next I look at the effect of regulation on credit rating agencies. This dissertation has three essays on corporate finance. The first essay is co-authored with Gary Caton, Jeremy Goh and Scott Linn. The essay is motivated by the CEO pay slice of Bebchuk, Cremers, Peyers (2011) and explores if the negative effect of pay slice on Tobin’s Q, can be reduced or mitigated completely by the presence of friendly boards and equity incentive alignment. We find that this is the case, where connections between CEOs and board, and giving the CEO high equity portion of pay, reduces the negative effect of pay slice on Q. The second essay is co-authored with Gary Caton and Jeremy Goh. We look at credit rating changes ability to predict operating profitability, particularly after Regulation FD and the Dodd-Frank Act. We find that this is the case, but only for specific sub groups of the rating changes. The third essay looks at CEOs’ involvement in earnings conference calls. Relative to their pay among the top-five executives, I find that CEOs who speak more than they are paid generate abnormal returns in the conference calls they speak at, and add firm value via Tobin’s Q. They however are more susceptible to executive turnovers. Those who speak more than paid maintain their jobs.