Corporate governance issues have become increasingly important to financial managers and shareholders. Firms that are plagued by poor performance, incompetent managers, or excess agency costs have become the subject of a dramatic increase in shareholder activism. Dissident shareholders, who are unable to launch costly takeover bids or proxy contests, have initiated a process of governance reform through the use of shareholder sponsored proposals. Shareholder proposals are a direct attempt to reverse operating or voting policies, such as a proposal to repeal a classified board. Managers announce shareholder proposals in a proxy statement and typically include a vote recommendation against the proposal. In the first essay, I find an unfavorable stock price reaction to the announcement of a shareholder proposal. In some cases, however, management supports the proposal and negotiates an agreement with the proposing shareholder. Stock prices react favorably to a settlement announcement. If managers are willing to negotiate with shareholders, they are perceived to be acting in the best interest of shareholders. If managers are unwilling, shareholders believe a severe agency problem exists. In the second essay, the effect that ownership structure has on voting outcomes of shareholder proposals is examined. I find a direct relationship between the percentage of votes cast in favor of the proposal and levels of institutional ownership. There is an inverse relationship between the percentage of votes and managerial ownership and firm size. Large firms with powerful owner-managers present the greatest obstacle to the success of shareholder proposals. The repeal of shareholder rights plans is one of the most frequently used shareholder proposals. By adopting the rights plan, managers increase the probability of defeating a takeover, but increase their power in negotiating with a potential acquiring firm. In the third essay, I find that firms who combine a rights plan with high debt levels construct a powerful defense against a hostile takeover. Shareholders target these high debt firms and design proposals to repeal the rights plan.

本論文研究了累積投票對中國上市公司業績的影響。我們主要研究三個問題。第一個問題是研究哪类所有权机构的公司更易于采取累积投票，第二是通過累積投票產生董事會成員和通過直接投票產生的董事會成員可能存在的差異。第三個問題是研究累積投票選出成員對公司治理和公司業績產生的影響。通過控制公司的特點，我們發現，控股股东占很大比例的公司（即便是在30%规定采取累积投票线下）更易于采用累积投票，其二，累積投票選舉產生的董事會和監事會更可能是專業人士，而且平均而言，累積投票選出的董事和監事會成員，比那些由直接投票選舉產生的董事會和監事會成員，擁有更多的公司股票. 此外，有證據表明他們更有可能代表股東利益而非管理層或大股東利益，這些證據不僅表明他們更有能力履行其職責，並且表明他們的個人利益與公司利益之間更為一致。本文延伸了現存的研究，並且證明了累積投票選舉產生的董事會對公司績效有積極的影響。但是，證據表明累計投票監事的比例增加並不會顯著改善公司績效。這些證據表明，累積投票在某種程度上改進了中國上市公司的公司治理狀況。 / This paper investigates the impact of cumulative voting on the performance of listed corporations in China. We focus on three main issues: investigating effects of corporations’ ownership structure on cumulative voting adoption, exploring differences (if any) in personal attributes between the board members elected by cumulative voting and those elected by straight voting, and identifying the influence of cumulative voting members on corporate governance and firm performance. Controlling firm characteristics, we find that corporations with controlling shareholder who owns a larger proportion (even under the 30% regulatory cumulative voting cut-off) of the shares are more likely to adopt accumulative voting but the ownership concentration of other block shareholders tend to be uncorrelated or even negatively correlated with cumulative voting. In addition, both directors and supervisors elected by cumulative voting are (a) more likely to have professional titles, (b) own more stocks on average than those elected by straight voting, and (c) are more likely to be shareholder- rather than management-affiliated or controlling shareholder (typically the largest shareholder-affiliated). Such evidence indicates that they are more capable of fulfilling their duties and suggests that their personal interests may be more compatible with those of the listed corporations. In addition, we extend the existing literature by showing a positive correlation between the percentage of cumulative voting-elected directors sitting in the board of directors and firm performance. However, we did not find a significant relationship between the increase of proportion of CV supervisors and firm performance. In summary, these results demonstrate that cumulative voting, to some extent, improves corporate governance in China’s listed corporations. / Detailed summary in vernacular field only. / Qian, Jinghui. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2012. / Includes bibliographical references (leaves 65-69). / Abstracts also in Chinese. / ABSTRACT(ENGLISH) --- p.i / ABSTRACT(CHINESE) --- p.ii / ACKNOWLEDGEMENT --- p.iii / TABLE OF CONTENTS --- p.iv / LIST OF TABLES --- p.v / Chapter 1 --- Introduction --- p.1 / Chapter 1.1 --- The notion of cumulative voting --- p.1 / Chapter 1.2 --- The situations in China --- p.3 / Chapter 1.3 --- Issues to be investigated in the paper --- p.5 / Chapter 2 --- Literature Review --- p.7 / Chapter 2.1 --- Theoretical effects of cumulative voting --- p.9 / Chapter 2.2 --- Empirical findings --- p.10 / Chapter 2.3 --- Cumulative voting in China --- p.14 / Chapter 3 --- Theory and Hypothesis --- p.16 / Chapter 4 --- Data and Methodology --- p.23 / Chapter 4.1 --- Data --- p.23 / Chapter 4.2 --- Methodology --- p.25 / Chapter 4.2.1 --- Propensity score matching --- p.26 / Chapter 4.2.2 --- Barber and Lyon matching --- p.32 / Chapter 4.2.3 --- Comparison between directory and supervisory members --- p.34 / Chapter 4.2.4 --- OLS and difference-in-differences regressions --- p.35 / Chapter 5 --- Empirical Results --- p.38 / Chapter 5.1 --- Sample characteristics of cumulative voting elections (CVEs) --- p.38 / Chapter 5.2 --- Comparison between cumulative voting and non-cumulative voting --- p.40 / Chapter 5.2.1 --- PSM statistical description and regression results --- p.40 / Chapter 5.2.2 --- Barber and Lyon matching --- p.49 / Chapter 5.2.3 --- Differences between CV members and NCV members --- p.50 / Chapter 5.3 --- Effects of Proportion of CV directors and CV supervisors on firm performance --- p.54 / Chapter 5.4 --- Robutness analysis --- p.59 / Chapter 6 --- Conclusions and Discussions --- p.61 / Chapter 6.1 --- Summary of findings --- p.61 / Chapter 6.2 --- Theoretical contributions and limitations --- p.63 / REFERENCES --- p.65 / Chapter Appendix I --- Variables and Descriptions --- p.70 / Chapter Appendix II --- Supplementary PSM Regression --- p.73 / Chapter Appendix III --- Supplementary Comparison CV members vs. NCV members --- p.75 / Chapter Appendix IV --- Robustness of the Regression --- p.79 / BIBLIOGRAPHY --- p.82

Chapter 2 provides the literature survey on investor protection and liquidity provision. Work in related studies and the latest developments in these areas are reviewed. / Chapter 3 coven the institutional details of the Hong Kong stock market and the specification of datasets. The descriptive statistics of the trading activities of the sample companies are also presented. An understanding of these descriptive statistics is useful in choosing the appropriate theoretical model and econometric techniques in the analysis. Apart form using regression analysis to investigate the impacts of transitory volatility on market depth and order-flow composition; additional control measures are also implemented. For instance, matched samples based on market depth, transitory volatility, daily trading volume, etc. are constructed. Statistical Tests are employed to investigate the influence of investor protection. / Chapter 4 presents the results of the regression models. Apart form investigating the impacts of transitory volatility on market depth and order-flow composition, this chapter also contributes to the literature by examining the distinction (of this interaction) between companies under different regulatory environment. It is found that the liquidity replenishments for Hong Kong-based companies are more rapid than their Chinese counterparts. The results show that companies ruled by strict governance regulations provide more liquidity when liquidity is most needed. Additional test results also suggest that this difference is robust to various control criteria. / Chapter 5 gives the summary and conclusions. / In this dissertation, data on the Hong Kong Exchange (HKEx) are employed. The Hong Kong equity market lists companies from distinct investor protection environments. These companies are traded under the same market mechanism even though they have different levels of legal protection for investors e.g. Hang Seng Index (HSI) Constituents versus H-shares/red chips. The HKEx is also a very good example of pure order driven markets. Stock prices are determined by the buy and sell orders submitted by traders without liquidity providers of the last resort. Therefore, the Hong Kong equity market provides a unique opportunity to compare the liquidity replenishment process across diverse regulatory environments, but still under one pure order driven market trading with the same mechanism and currency. The choice of Hong Kong data is also justified on the grounds of the size of the Hong Kong market and the increasing importance of Hong Kong in worldwide financial market. / The purpose of this dissertation is to examine the importance of investor protection for the dynamics between liquidity provision and transitory volatility in a pure order-driven market. I posit that environments with better investor protection lead to a more stable ecological system of the supply and the demand of liquidity. / This dissertation has five chapters. Chapter 1 is the introduction that covers the motivation and major findings of the dissertation. / Leung Chung Ho. / "June 2007." / Adviser: Raymond So. / Source: Dissertation Abstracts International, Volume: 69-01, Section: A, page: 0320. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2007. / Includes bibliographical references (p. 305-308). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. [Ann Arbor, MI] : ProQuest Information and Learning, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest dissertations and theses, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstracts in English and Chinese. / School code: 1307.

Debt holding by managers, i.e., inside debt, aligns the incentives of managers more closely with those of debtholders, reducing agency costs of debt (Jensen and Meckling (1976) and Edmans and Liu (2011)). My thesis investigates the effect of managerial ownership of debt on corporate risk-taking, bank loan contracting, and accounting conservatism. / In the first chapter I examine the effect of managerial ownership of debt on agency costs of debt problems related to risk-taking. I find that higher managerial ownership of debt implements lower corporate risk-taking, in terms of less investment in R&D, more investment in capital expenditures, and more corporate diversification. The role of inside debt in moderating risk-taking is more pronounced in firms with high level of default risk. These findings suggest that managers with large inside debt holdings are less likely to pursue risky projects that potentially transfer wealth from debtholders to shareholders. / In the second chapter I examine how terms of bank loans are related to managerial ownership of debt. Specifically, the analysis uncovers significant evidence of lower loan spreads for firms with larger debt ownership by CEOs. The negative relation is more pronounced when creditors face higher expropriation risk and when the CEO's expected retirement horizon is beyond loan maturity. I also find that loans to firms with larger managerial debt holdings are associated with smaller lending syndicates, fewer covenant restrictions, and less collateral requirement, consistent with lenders anticipating lower expropriation risk at these firms. / In the third chapter I examine the relation between accounting conservatism and managerial ownership of debt. Consistent with debt holdings by managers mitigating the debtholder-shareholder conflicts and reducing debtholders' demand for accounting conservatism, I find significant evidence of less conservative financial reporting at firms whose CEOs have accumulated more deferred compensation and pension benefits. This negative relation is more pronounced in firms with higher expected agency costs of debt and in firms that can credibly commit to a higher level of conservatism if required by debtholders. These findings are robust to using a number of alternative accounting conservatism measures and to correcting for potential endogeneity of managerial ownership of debt. / Xin, Xiangang. / Advisers: Danqing Young; Oliver M. Rui; Cong Wang. / Source: Dissertation Abstracts International, Volume: 73-07(E), Section: A. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2011. / Includes bibliographical references (leaves 134-140). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstract also in Chinese.

This dissertation investigates why a substantial number of common stocks is held by companies in many countries, especially in Japan. Chapter 1 gives an overview of historical and legal issues regarding corporate shareholding in Japan. Chapter 2 reviews how researchers have, theoretically and empirically, approached corporate shareholding issues. Chapter 3 elaborates on a corporate shareholding model which incorporates a standard principal-agent model with Aoki's managerial risk sharing argument (Aoki, 1988). The model finds that a risk-averse manager of a firm invests in other firms if managerial reward is linked with the value of the firm she manages, and if the operating profits of investing and invested firms are negatively correlated. Corporate stock investment is larger if the invested (and/or investing) company's operating profit is less volatile and/or if the covariance in the operating profits of the companies is more strongly negative. Although a stronger link between corporate performance and managerial reward increases managers' incentive to exert efforts, it also increases the risk that managers must bear. If the risk is too high, managers would leave their companies. Corporate stock investment reduces the risk, and enables shareholders to offer a higher incentive to the managers and to earn a higher (expected) income. Chapter 4 examines three major arguments concerning the rationale behind the practice of corporate shareholding: the competitive-effect, risk-sharing, and control-rights arguments. Predictions drawn from those arguments are tested using panel data of 186 Japanese corporate group firms from 1980 to 1988. The main findings of this study are as follows. (1) The competitive-effect argument is clearly supported by the data. Firms in the same industry do tend to invest more in one another. (2) The evidence in favor of the risksharing argument is weaker — although firms with less risky operating profits tend to attract more investment, the relationship between investment and the covariance in the firms' operating profits is ambiguous. (3) The strongest empirical support is given to the control-rights argument. Indeed, the evidence confirms that a firm is more likely to invest in other firms that hold more of its own shares. Chapter 5 concludes this dissertation.

Controversy currently exists over whether abnormal returns (ARs) are earned by shareholders of bidder and target banks through a Merger and Acquisition (M&A). The state of the economy in which the firms operate is often mentioned as a reason for firms engaging in M&As, however, the extent to which economies influence the ARs of shareholders is unknown. Following MacKinlay (1997), the aim of this study is to determine the average ARs earned or lost by shareholders of several banks around the world during an M&A. The results obtained may indicate that shareholders of bidding firms consider an M&A to be a wealth-destroying event irrespective of the state of the economy. It would seem that target firms’ shareholders consider M&As to be wealth-creating events when they occur during a period of real economic expansion. However, during periods of real economic contraction, target firms’ shareholders consider M&As to be wealth-destroying events. Thus, the state of an economy during an M&A can affect average ARs considerably.

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This dissertation investigates why a substantial number of common stocks is held by companies in many countries, especially in Japan. Chapter 1 gives an overview of historical and legal issues regarding corporate shareholding in Japan. Chapter 2 reviews how researchers have, theoretically and empirically, approached corporate shareholding issues. Chapter 3 elaborates on a corporate shareholding model which incorporates a standard principal-agent model with Aoki's managerial risk sharing argument (Aoki, 1988). The model finds that a risk-averse manager of a firm invests in other firms if managerial reward is linked with the value of the firm she manages, and if the operating profits of investing and invested firms are negatively correlated. Corporate stock investment is larger if the invested (and/or investing) company's operating profit is less volatile and/or if the covariance in the operating profits of the companies is more strongly negative. Although a stronger link between corporate performance and managerial reward increases managers' incentive to exert efforts, it also increases the risk that managers must bear. If the risk is too high, managers would leave their companies. Corporate stock investment reduces the risk, and enables shareholders to offer a higher incentive to the managers and to earn a higher (expected) income. Chapter 4 examines three major arguments concerning the rationale behind the practice of corporate shareholding: the competitive-effect, risk-sharing, and control-rights arguments. Predictions drawn from those arguments are tested using panel data of 186 Japanese corporate group firms from 1980 to 1988. The main findings of this study are as follows. (1) The competitive-effect argument is clearly supported by the data. Firms in the same industry do tend to invest more in one another. (2) The evidence in favor of the risksharing argument is weaker — although firms with less risky operating profits tend to attract more investment, the relationship between investment and the covariance in the firms' operating profits is ambiguous. (3) The strongest empirical support is given to the control-rights argument. Indeed, the evidence confirms that a firm is more likely to invest in other firms that hold more of its own shares. Chapter 5 concludes this dissertation. / Arts, Faculty of / Vancouver School of Economics / Graduate

This dissertation is a study of fundamental questions in macro-finance using modern tools from textual analysis. These questions include how financial constraints affect firm investment and financing decisions when they are not presently binding, and whether stock returns are predictable based on concerns revealed in conversations between firms and investors. The first chapter examines whether financial covenants are an important consideration for firm decisions when they are not presently in violation. A key empirical challenge is measuring the risk of future covenant violations, which is not directly observed. I propose a novel measure of concerns about future violations by distinguishing between discussions of covenants in earnings calls that relate to the future as opposed to the past or present. As validation, I show that the measure predicts future violations and covaries intuitively with earnings, leverage, and default risk. Importantly, I find that concerns about covenants are significantly associated with reductions in investment as well as debt and equity financing activities. These responses persist even after controlling for standard measures of investment opportunities and are economically large relative to the effects of actual violations. The second chapter empirically analyzes two explanations for how covenants concerns relate to a firm's investment decisions. One explanation is that covenant concerns coincide with a deterioration in expected profitability, which dampens firms' incentives to invest. A second explanation is that firms become concerned when they expect violations to be more costly, which indicates future difficulties with funding investments. To shed light on the relevance of these two explanations, I examine empirical patterns in analyst expectations of future earnings, loan amendments in SEC filings, and the stock returns of firms that mention covenant concerns. The evidence suggest that both explanations are relevant mechanisms driving the correlation between covenant concerns and firm activity. However, I find that the second channel is more economically significant, suggesting that covenant concerns are informative about the degree to which firms are constrained by financial covenants. In the third chapter, I investigate how covenant concerns relate to firm policies in a standard model of investments with financial frictions. In the model, the theoretical object that most naturally links to covenant concerns is the expected shadow cost of the borrowing constraint. As in the data, the shadow cost of the borrowing constraint covaries negatively with earnings as well as firm investment and financing activity. Through an analysis of impulse response functions, I show how the empirical correlations between covenant concerns and firm policy arise in the model. One channel is through negative productivity shocks, which raises covenant concerns and leads to a fall in investment, debt, and equity issuance. The second channel is through higher leverage, holding fixed productivity. In the model, firm with higher debt levels are more concerned about covenants when hit by a negative productivity shock, and also choose less investment, debt issuance, and equity issuance. In this chapter, I also discuss several shortcomings of the model and suggest avenues for modifications. The final chapter investigates a new question: are stock returns predictable based on the extent to which firms are concerned about the macroeconomy? We document that firms that pay more attention to the macroeconomy earn lower average returns relative to firms that pay less attention to the macroeconomy. Differences in returns are economically significant and are not explained by traditional asset pricing factors, such as market beta, size, value, and idiosyncratic volatility. To explain the negative macroeconomic attention premium, we propose a model of attention allocation that links analyst attention to fundamental shocks affecting firm cash flows. In the model, attention to the macroeconomy is increasing in the share of earning news explained by the macroeconomic component. Firms with a greater share of cash flow news explained by the macroeconomic component face lower cash flow risk, hence earn lower expected returns.

The conflict that may arise among holders of competing claims on firms' assets is being studied under the heading of "agency theory." The primary purposes of the research done in this study were to: (1) economically model the individual investor's consumption-investment decision as it is modified by the agency problem, and (2) to econometrically model the firm's decision to issue convertible versus nonconvertible bonds using explanatory variables which measure the extent of the agency problem. Individual investors are assumed to maximize expected utility of consumption by choosing consumption and investment amounts over a single period. A mathematical model of the investor's consumption-investment decision was derived in an environment characterized by agency problems between stockholders and bondholders. It was demonstrated that if the capital markets exhibit conditions known as spanning and competitivity, then the only investors affected by the agency problem are those holding the affected securities prior to the act of expropriation. It was also shown that the agency problem does not vanish in general, even if investors attempt to avoid the expropriation by holding balanced portions of all outstanding claims on a firm's assets. Implications of the theoretical development were then tested by econometrically modelling the firm's choice of convertible versus nonconvertible debt. The explanatory variables included in the model included measures of the more popular reasons for convertible financing, such as the "debt sweetener" hypothesis and the "delayed equity" rationale discussed in most basic finance textbooks. In addition, measures of agency costs were included, since one possible solution to the agency problem is the issuance of convertible bonds. The empirical results showed that the model accounted for a significant portion of the discrimination between convertible and straight debt, and that the variables designed to measure agency costs were marginally significant. / Ph. D.