The dissertation consists of two essays. In the first essay, we investigate the relation of government ownership to the idiosyncratic volatility of Saudi Arabian firms that traded in the Saudi stock exchange between 2010 and 2016. The results show that publicly traded firms with an increase in government ownership have less idiosyncratic volatility. Furthermore, we investigate market leverage ratio, dividend payout ratio, and illiquidity ratio as potential roles in which government ownership influences the idiosyncratic volatility. The results prove the negative relationship between government ownership and idiosyncratic volatility. In the second essay, we investigate the association between government ownership and momentum trading of firms traded in the Saudi stock exchange between 2010 and 2016. The results show that firms with higher state ownership are expected to have greater price momentum. We used two approaches: the portfolio sorting approach and the fixed effect approach, and these two approaches confirm the positive relationship between government ownership and momentum.

CEO succession decisions are an important part of boards of directors’ responsibilities to shareholders. I study two aspects of these decisions. First, I examine whether or not forced CEO departure decisions are based on information that the board of directors has, but external investors do not. I find that the proxy for private information in the forced CEO departure decision is positively related to abnormal returns at the forced CEO departure announcement. This is consistent with the hypotheses that prior to the departure announcement, investors underestimate the probability of forced CEO departure, and that private information revealed in forced CEO departure announcements has positive implications for firm value. A second question related to boards of directors’ CEO succession decisions concerns their decisions to participate in the external market for CEO talent. I find evidence suggesting that board decisions to participate in the external market for CEO talent are influenced by the costs and benefits of doing so. Specifically, cross sectional analyses of a proxy for industry homogeneity shows that this variable is positively related to external labor market participation, more standardized search processes, and a higher likelihood that a newly appointed CEO will survive three years or more. These findings are generally consistent with prediction that when industries are more homogenous, external search costs are lower, and higher quality matches may be obtained. I also test hypotheses related to benefits of matching to individuals with industry specific skills versus general management skills. I find that for several alternative proxies for industry specific skill demand, there is a negative relation between demand for industry specific skills and the decision to hire externally outside the industry. This can be interpreted as support for hypotheses that cross sectional variation in benefits associated with industry specific skills leads to fewer CEO appointments outside the industry, while benefits of general management skills are associated with a higher likelihood of inter-industry CEO appointment.

Executive Summary China started to implement reformation policies and employ free market system in 1979. Through twenty years, it did pose an great impact on the global market , although several panic events lie on the way: June 4 TAM Square Event in 1989, inflation panic in 1993, Asian Financial Crisis in 1997, and economic bubble in 2000. Although experiencing these crises, this Asian giant is still attracting huge foreign and Taiwanese capital inflows. Accordingly, the volume of trade between China and Taiwan is increasing rapidly. Since the economic environment is changing speedy, Chinese government keeps reforming its financial system to a great extent. By making best efforts for many years, China already achieved a nearly sound economic system. Indeed this mission is not easy for China to accomplish. However, following by rapid developments in economy, lots of potential problems, such as high unemployment rate, huge difference between rich and poor, discrimination between urban and rural areas, financial bad debts, localism, and corruption, will probably result in a global crisis if China does not handle those very cautiously. In Chapter II, we mainly discuss international business, the establishment of multinational enterprises, Dunning¡¦s Eclectic Theory, and major factors to set up cross boarder banks. Additionally, by analyzing the papers about the internationalization process of local banks and the funding sources for Taiwan corporations in China, we prove the phenomenon how those Taiwanese companies make their investments in China. In Chapter III, we explain the research method in this paper. We interviewed the managers who have worked for China branches of Taiwan financial institutions and conducted a survey for the listing corporations which already invested in China. In Chapter IV, we conduct a research and analysis on both Taiwan and China entire environments including the process of China economic reformation and development, the trade and investment interactions between China and Taiwan, the evolution of China banking system, the business model and strategies of foreign banks in China, the problems for Taiwan banks, the analyses of relevant regulations and policies in China, SWOT analysis among Taiwan, China, and foreign banks, and marketing strategies of Taiwan banks for Taiwan corporations in China. In Chapter V, based on the above analyses, in order to provide the advice for our government and local banks, we evaluate whether Taiwanese banks can capture the opportunity to expand their market in China under current regulations, competitive environment, and customer demands. In Chapter VI, we make conclusions and suggestions including the future strategies of local banks, how to employ strategic alliance or joint venture closed to marketing strategies of Taiwan corporations in China, and suggestions for Taiwanese government, banking, and people who work in banks.

Written in the wake of the 2007-08 financial crisis, the following essays explore the nature and implications of firm-level financial distress. The first essay examines the external effects of financial distress, while the second and third essays examine its internal consequences. The first essay investigates the potential contagion effects of financial distress among retail firms using a novel measure of retailers' geographic exposure to one another and, in particular, to liquidated chain stores. The second essay draws on new, hand-collected data on firm-level layoff instances to look into the ways in which financial distress impinges on firms' employment behavior. Building on the second essay, the third essay considers financial market reactions to layoff decisions, particularly those resulting from financial strain. Each essay sheds additional light on the ways in which financial distress propagates through to affect the economy at large. Overall, the picture that emerges is one in which firm-level financial distress appears to be an important factor behind the long and protracted nature of the current economic recovery. / Economics

This dissertation studies moral hazard problems and an information acquisition problem in dynamic economic environments. In chapter 1, I study a continuous-time principal-agent model in which a risk-neutral agent protected by limited liability exerts costly efforts to manage a project for her principal. Unobserved risk-taking by the agent is value-reducing in the sense that it increases the chance of large losses, even though it raises short-term profits. In the optimal contract, severe punishment that follows a large loss prevents the agent from taking hidden risks. However, after some histories, punishment can no longer be used because of limited liability. The principal allows the agent to take hidden risk when the firm is close to liquidation. In addition, I explore the roles of standard securities in implementing the optimal contract. The implementation shows that driven by the agency conflicts, incomplete hedging against Poisson risk provides incentives for the agent to take the safe project. Moreover, I study the optimality of "high-water mark" contract widely used in the hedge fund industry and find that "distance-to-threshold" is important in understanding the risk-shifting problem in a dynamic context. In chapter 2, I study a continuous-time moral hazard model in which the principal hires a team of agents to run the business. The firm consists of multiple divisions and agents exert costly efforts to improve the divisional cash flows. The firm size evolves stochastically based on the aggregate cash flows.The model delivers a negative relationship between firm sizes and pay-for-divisional incentives, and I characterize conditions under which joint/relative performance evaluation will be used. I also explore the implications of team production on the firm's optimal capital structure and financial policy. In chapter 3, I study a multi-armed bandits problem with ambiguity. Decision-maker views the probabilities underlying each arm as imprecise and his preference is represented by recursive multiple-priors. I show that the classical "Gittins Index" generalizes to a "Multiple-Priors Gittins Index". In the setting with one safe arm and one ambiguous arm, the decision-maker plays the ambiguous arm if its "Multiple-Priors Gittins Index" is higher than the return delivered by the safe arm. In the multi-armed environment, I obtain the "Multiple-Priors Index Theorem" which states that the optimal strategy for the decision-maker is to play the ambiguous arm with the highest Multiple-Priors Index.

This study explained the diversity of corporate financial practices in two nations. Existing studies have emphasized the reliance on equity finance in U.S. firms and bank loans in Japanese firms. In fact, patterns of corporate finance were much more complex. Financial institutions, which were created by national economic policy and regulation, affected corporate financial practices, but corporate financial practices often differed from what policymakers expected. Differences in corporate financial practices between nations also reflected differences in the mixture of industries in each nation. Many factors such as the amount of fixed capital, the process of production, the level of risk, the degree of innovation, and the importance of the industry in the national economy affected corporate financial practices. In addition, corporate financial practices within each nation differed from firm to firm due to managers’ considerations about stock ownership, which would affect their control power; corporate finance was closely related to control over management through ownership. To explain these complexities of corporate financial practices, the study linked corporate finance with the development of financial institutions in the United States and in Japan. While financial institutions affected corporate financial practices, the response of the firms to financial institutions and opportunities were diverse. The study also attempted to grasp variations in corporate financial practices by dealing with companies in three sectors: railroads, public utilities, and manufacturing. Finally, the study examined the structure of firm ownership. Contradictory to the widely held belief that U.S. firms distributed securities more widely to the public than did Japanese firms, many large American firms remained closely held, while some Japanese counterparts built publicly-held corporations.

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I study how insider trading interacts with the political economy, regulators, and other corporate governance mechanisms. In the first section, I examine the impact of insider trading restriction enforcement on firm innovation. U. S. Securities and Exchange Commission enforcement actions are intended to protect investors and limit expropriation by firm insiders, but enforcement could impact insiders’ incentives to contribute to value enhancing activities. Therefore, I explore how corporate innovation and performance respond to insider trading restrictions imposed by firms and regulators. Using manually collected data on SEC indictments against corporate insiders, I document more innovative activity following external insider trading restrictions. External restrictions are also followed by higher corporate investment, capital access, and operating performance. Similarly, internal blackout restrictions to insider trading are also linked to more patents. SEC and congressional rule changes serve as quasi-natural experiments resulting in shocks in enforcement and indictments for identification and inference. Overall, the results suggest insider trading restrictions and enforcement actions impact subsequent firm activities and managerial decisions by protecting outside investment, resulting in more investment and innovation. In the second section, I explore the relation between political uncertainty and insider trading. With political uncertainty elevated recently, I examine the role of political uncertainty among insiders. By measuring firm-specific political risk measured from conference calls, I observe insiders trade more actively during uncertain periods with trading volume and transaction value increasing alongside political uncertainty. The results are driven by non-routine insider transactions and purchases at firms with CEO duality and fewer insider trading restrictions. Next, I observe similar results when exploiting variation in election timing across states and alternative external measures. Moreover, I find evidence of informed insider trading by observing higher abnormal returns following insider trades amidst political uncertainty. Finally, I find political uncertainty is linked to lower bid-ask spreads and leverage but observe higher outstanding shares with more insider trading when experiencing positive political uncertainty, consistent with insiders informing markets and improving liquidity. Overall, these results suggest insiders purchase more actively and opportunistically amidst political uncertainty, improving market information quality, especially when internal governance is accommodating.

Thesis advisor: Thomas Chemmanur / Thesis advisor: David Solomon / This document comprises three essays regarding actual share repurchases. In Chapter 1, I show that external pressure in the form of equity analysts asking questions about a firm's actual repurchases can lead firms to more extensively follow through on their recently announced open market share repurchase programs. Such a phenomenon cannot be explained by mere firm characteristics. Instead, only analysts' questions that are shorter, more focused on share repurchases, and blunter in language appear to drive firms for greater follow-throughs. The second essay, detailed in Chapter 2, presents another motivation for firms to actually buy back shares under their active open market share repurchase programs. Specifically, firms with higher accounting quality will likely repurchase more shares to signal their accounting superiority after another firm operating in the same product market issues a financial restatement. As a result, the repurchasing firms separate from the pooling equilibrium with lower accounting quality firms and thus incur lower accounting-related litigation risks. Finally, in the third essay, located in Chapter 3, we compare cash dividends with share repurchases. Firms with greater heterogeneity in beliefs between insiders and outsiders, and among outside equity holders more likely prefer share repurchases to cash dividends for payout. Importantly, this finding can partially explain the disappearing dividend puzzle where rising heterogeneity in beliefs in the economy may have contributed to the substitution of cash dividends with share repurchases in the past two decades. / Thesis (PhD) — Boston College, 2023. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.