Tax aggressiveness generates significant cash savings and information asymmetry. Combining these two consequences of tax aggressiveness, I suggest that tax aggressiveness is associated with higher agency costs of free cash flows that affect investment decisions. Using the conditional investment efficiency model, I find evidence that tax aggressiveness is associated with more investments in firms with high access to investable funds, thus suggesting tax aggressiveness is associated with overinvestment. I also provide evidence that stronger tax monitoring and a change in tax disclosures mitigate the relation between tax aggressiveness and overinvestment. Lastly, I find that the overinvestment is associated with lower future abnormal returns. Thus, my results suggest that poor managerial investment decision making is an unintended consequence to tax aggressiveness. Additionally, I further the need for shareholders and board of directors to exert influence to avoid compensating managers for aggressive tax strategies.

Since the dividend irrelevance theory of Miller and Modigliani (1961), academics and practitioners still have little understanding of the managerial incentives underpinning dividend policy. Black (1976) observed, “The harder we look at the dividend picture, the more it seems like a puzzle, with pieces that just don’t fit together.” <br /> <br /> This thesis aims to shed additional light on the dividend puzzle. Accordingly, two theoretical models have been developed to help explain why firms pay dividends or repurchase their own shares. The models consider the case in which the managers of a high-quality firm (firm H) and a low-quality firm (firm L) choose to use corporate cash flows to pay dividends, repurchase shares, or invest in a real project from which they can earn private benefits. I focus on the case in which firm H has a positive NPV project whereas firm L has a negative NPV project. <br /> <br /> In the first model, developed in spirit of Isagawa (2000), I show that paying dividends is a dominated strategy for firm H, regardless of the managerial weight parameter. If the manager is myopic, firm L will choose to repurchase shares at the detriment of existing shareholders. If the manager is farsighted, on the other hand, firm L will choose to pay dividends. I also consider the case in which investors are irrational in that they do not update their beliefs upon observing one firm repurchasing shares while the other firm paying dividends. The model shows that, in inefficient market, firm L will not mimic given that firm H repurchases shares since it cannot obtain any benefit from doing so. <br /> <br /> In the second model, built on Fairchild and Zhang’s (2005) work, in which the managerial payout decisions depend on the relative magnitudes of dividend and repurchase catering premia, I demonstrate that a myopic manager of firm H may pass up a positive NPV project in order to cater to investor demand for dividends or share repurchases (an adverse selection problem). In addition, I show that the agency cost of free cash flow can be mitigated if the dividend-catering premium is sufficiently high. That is, firm L’s manager will have a strong incentive to return excess cash to shareholders rather than invest it in a negative NPV project. <br /> <br /> Then, I investigate dividend changes in Thailand over the period 2002-2005. To test the signalling and free cash flow hypotheses, I first analyse profitability changes around dividend changes and benchmark them with control firms, and examine the relation between dividend changes and the past and future profitability. Consistent with Benartzi et al.’s (1997) evidence in the U.S., dividend changes in Thailand do not signal future profitability but rather the past performance. Then, I examine the determinants of dividend changes and firm’s decision to change dividends. I also investigate the short-run and long-run stock price performance of dividend-changing firms, and the relation between announcement returns and hypothesised independent variables. Finally, I examine firms’ investment behaviour following dividend changes. The results do not support the view that dividend changes signal future profitability. Overall, the findings are broadly consistent with the free cash flow hypothesis rather than the signalling hypothesis. <br /> <br /> Additionally, I provide preliminary evidence on open-market share repurchases (OMRs) in Thailand over the period December 2001 to January 2007. I find that stock prices react positively to OMR announcements and continue to increase in the longer term, suggesting that stock market underreacts to the signal conveyed by the managers of repurchasing firms. Comparing the actual repurchase cost with the costs of benchmark portfolios, I find that the actual repurchase cost is the lowest. This finding suggests that the managers of repurchasing firms have substantial ability to time the market.

Le Capital-Investissement et plus particulièrement les opérations de LBO, occupent une place importante dans l'économie mondiale et française. Ce travail de recherche a pour objet l'analyse de l'impact des leviers organisationnels et de gouvernance sur la performance opérationnelle et la rentabilité des entreprises françaises sous LBO. Nous présentons ainsi, en premier lieu, dans les deux premiers chapitres de cette thèse, une revue complète de la littérature, ainsi que le modèle théorique de l'impact des leviers organisationnels et de gouvernance sur la performance opérationnelle et la rentabilité des entreprises sous LBO en privilégiant une approche actionnariale de la gouvernance.Ensuite, dans le cadre des troisième et quatrième chapitres de cette thèse, nous examinons de façon empirique, d'une part, l'impact de la mise en place des opérations de LBO sur la performance opérationnelle des entreprises françaises, et, d'autre part, les effets des leviers organisationnels et de gouvernance sur la rentabilité des entreprises françaises sous LBO.Nos résultats confirment en partie les résultats anglo-saxons concernant l'impact positif des opérations de LBO sur la performance de la société cible, ils sont obtenus en effectuant une double analyse comparative : la première en comparant l'évolution de la performance avant et après la mise en place du LBO, et la deuxième en effectuant une comparaison par rapport à un groupe de contrôle composé d'entreprises aux caractéristiques comparables mais qui n'ont pas fait l'objet d'un LBO.Enfin, nous proposons un modèle explicatif des effets des leviers organisationnels et de gouvernance sur la rentabilité des entreprises sous LBO. / Private Equity, especially Leverage Buyout activity (LBO), is now an important concern in the world economy and also in France. This kind of investment is an important alternative to capital market.The main purpose of this thesis is to examine the effects of corporate governance and organizational mechanisms on the performance of French firms leveraged buyout.We presented in the first part of this thesis, the first and second chapter of it, the history of the emergence of these investments in the world and especially in France, and an overview of the literature on private equity and leveraged buyouts, focusing on our theoretical framework which is based on corporate governance theories, especially on agency theory and financial performance.Moreover, we discussed the literature about the relation between operating performance, corporate governance and Leverage Buyout. As part of this thesis and in the third and fourth chapters, we proposed an empirical study of the impact of LBO on operating performance.This research also proposes a new approach to the relationship governance-performance by a financial modelling of the relation between corporate governance and performance in the case of leveraged buyout firms in France.This thesis is a contribution to the Leverage Buyout and Private Equity literature from a theoretical and empirical point of view. It also has implications for the managers of private firms.

本研究之主要目的在於探討公司自由現金流量與其過度投資之關聯性，並設法瞭解內外部機制是否有助於減緩公司過度投資之代理問題。此外，本研究亦探究公司自由現金流量與債務控制之關聯性，以及債務控制與公司之其他監督機制間之關聯性。本研究發現，公司自由現金流量愈大時，愈可能有過度投資之現象，且此種現象較集中於自由現金流量為正之公司。此外，相較於高成長公司，低成長公司自由現金流量之代理問題較為嚴重，更傾向於過度投資。而在減緩代理問題之機制上，管理階層及機構投資人之持股並無法有效減緩代理成本，或抑制公司過度投資之現象，但或許可藉由債務控制減緩過度投資之問題。再者，本研究推論過度投資之公司可能會傾向於提前適用資產減損之會計處理，以認列其投資損失。最後，公司代理問題愈嚴重時，並不一定會藉由債務控制方式減緩過度投資。而在降低代理成本的作用上，管理者持股、機構投資人持股與債務控制之間具有明顯的互補關係。 / The main purpose of this study is to examine the association between a firm’s free cash flows and its overinvestment. In addition, I also examine the interrelationships between free cash flow, managerial ownership, institutional investors, and debt .The empirical results suggest that overinvestment is concentrated in firms with higher levels of free cash flows and lower opportunities for growth. Further tests find that a firm’s managerial ownership, institutional investors’ ownership may not effectively mitigate its overinvestment. However, debt appears to control overinvestment. Besides, I infer that firms with overinvestment may choose to adopt the accounting standards for asset impairment earlier to recognize their investment losses. Finally, I find evidence that firms may not be using debt control to mitigate their overinvestment, and a firm’s managerial ownership, institutional investors’ ownership and debt may serve as substitutes in controlling its agency costs.