Global supply chains have become increasingly complex and a critical source of competitive advantage, which makes the understanding of how supply chains create and distribute value an essential task. Prior literature on concentration risks has primarily focused on customer concentration and has overlooked the challenges posed by the major upstream supply chain partners. In addition, CEOs with an optimal mix of technical and behavioral abilities can shape the strategic decision-making process to obtain an advantage against the nonfinancial stakeholders. The existing literature has also overlooked the significant role of the CEO in reducing the impact of supplier-base/customer-base concentrations. Utilizing objective supply chain relation data collected from Bloomberg SPLC and Compustat, we map the supplier base and the customer base for each electronic and chemical manufacturing firm publicly listed under S&P1500 for the fiscal year 2017. We then construct objective measures of supplier and customer concentrations and examine their impacts on the focal firm's financial performance measured by Tobin's Q, gross profit margin, and net profit margin. The performance metrics also include the focal firm's payable period (against the supplier-base) and receivable period (against the customer-base). We also collect information related to the CEOs appointed by the focal manufacturing firm, such as gender, age, and tenure from Execucomp, and consequently investigate their impacts on the supplier concentration and the customer concentration. Our empirical analysis shows contradictory results in the context of supplier-base/customer-base concentrations: higher supplier-base concentration is observed to harm the focal firm’s financial performance, but higher customer-base concentration leads to an increase in the focal firm’s profitability. Although CEO characteristics such as tenure and age did not have any notable impact, female CEOs are found to reduce the adversarial impact of supplier-base concentration and are assumed to exercise a voluntary power restraint against the cooperative customer-base.

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Prior literature suggests that CEOs capitalize on their position within the hierarchy of all business executives, resulting in various – both positive and negative – firm outcomes. Using a novel data set on golf outings to measure the quality of a CEO's informal (vs. formal) network, as measured by the CEO's network centrality, this study examines whether well-connected CEOs generate private gains through insider trades. Results suggest that, among golfing CEOs, CEOs with higher quality informal networks generate significantly higher insider trading profits on sales of their firms' stock, consistent with more famous, powerful, and influential CEOs possessing superior information. The paper continues by delineating a channel through which private information flow to network participants by documenting significantly different golf patterns of CEOs during the two weeks before material firm events become public while showing that CEOs generate noticeably higher insider trading profits from stock trades executed during the two weeks following these golf outings. This study highlights a setting in which shareholders are at risk of wealth transfer and illustrates the potential limitations of regulation concerning insider trading.

As financial intermediaries, banks are "special" because they play an important role in transferring funds from surplus spending units to deficit spending units and serve as a channel of monetary policy. Therefore, the safety and soundness of banks is essential to the financial stability and economic development. This study investigates how bank governance mechanisms, namely, executive compensation and board of directors, affect bank safety. Given the unique nature that bank assets are opaque, bank governance is expected to be different from corporate governance of industrial firms. This study also investigates how the opaqueness nature of bank assets affects the compensation design of bank executives. Chapter 1 investigates the association between asset opacity and CEO pay-performance sensitivity of bank holding companies (BHCs). Contrary to the monitoring cost hypothesis according to which when information asymmetry is high firms rely more heavily on equity-based compensation, I find that when the share of opaque assets in total assets increases, pay-performance sensitivity in BHCs declines. This finding supports the view that when the share of opaque assets increases, managers can pursue risky projects to a greater extent in the interests of shareholders but at the expenses of bondholders, and, hence, the optimal compensation structure in BHCs with larger share of opaque assets has a lower pay-performance sensitivity to restrain managerial risk-taking incentives, reducing the conflicts of interests between shareholders and bondholders. The negative effect of asset opacity on pay-performance sensitivity is robust after accounting for the endogeneity of asset opacity and using various compensation measures. In addition, I find that higher pay-performance sensitivity generally leads to a greater share of opaque assets in total assets. The results of this study suggest that asset opacity is an important determinant of compensation structure in the banking industry. BHCs should use caution when using stocks and options to promote prudent risk taking under bank asset opacity conditions because opaque bank assets make risk-shifting behaviors induced by equity-based compensation difficult to monitor, threatening the bank stability. Regulators should also account for this opacity effect. Chapter 2 investigates the relationship between insolvency risk and executive compensation for BHCs over the 1992-2008 period. I employ CEO compensation sensitivity to risk (vega) and pay-share inequality between the CEO and other executives as measures of compensation and employ a simultaneous equation model to account for the endogeneity problem between vega and risk. Five main results are obtained. First, CEO compensations in BHCs have risen in response to deregulation to resemble those of the industrial firms. Second, higher vegas lead to greater bank instability. Third, the association between bank stability and managerial compensation is bi-directional; higher vegas induce greater risk and vice versa. Fourth, BHCs in the next to the largest-size group increase CEO vegas the most and have the strongest potential to create instability in the financial industry, such as the one witnessed in 2007-2009. Fifth, increased pay-share inequality has effects opposite to those of the increase in vega; greater pay-share inequality is associated with greater bank stability. Implications of executive compensation effects on instability for depositors, deposit insurers and regulators are drawn. Chapter 3 investigates the association between the structure of board of directors and risk taking of bank holding companies. I use the number of directors on the risk committee and the frequency of its meetings to measure the strength of risk management exercised by bank boards. Several interesting findings are obtained. First, banks with stronger risk committees, namely risk committees with a greater number of directors and more frequent meetings, are associated with more diversified loan portfolios, greater amounts of safer loans, less mortgage-backed securities, and lower market risk. These results continue to hold even after controlling for the possible endogeneity problem using the dynamic panel GMM estimator. Overall, these results suggest that stronger risk management by bank boards has a positive and significant impact on banks' safety and soundness. Second, the percentage of banks having a risk committee has been increasing steadily since 1999, suggesting bank boards have gradually taken a greater role in risk management and their fiduciary duties have expanded beyond shareholders to include depositors. However, less than half of bank boards have a risk committee before 2007, suggesting weak risk management at the top level and the possibility that bank boards may have failed to control the excessive risk-taking in the banking industry leading to the recent financial crisis. Finally, the percentage of banks with a risk committee is still less than 60% after the crisis, suggesting that depositors and bank supervisors could enhance the stability of banks by further improving the effectiveness of internal risk control at bank boards. / Business Administration/Finance

This dissertation studies international acquisitions mainly in terms of their impact on firm competitiveness and CEO compensation. International acquisitions have been used extensively by multinational companies for internationalization purposes. They are the main drivers of foreign direct investment flow around the world. The large number of international acquisitions and the amount of money used for them make these acquisitions important corporate strategies to examine. This study explores from different perspectives the implications of international acquisitions for firms. In the first chapter, we assess the impact of international acquisitions on the competitiveness of companies. Competitiveness has been studied mostly at the country and industry levels; firm-level competitiveness has been understudied, and the impact the organizational choices of companies have on competitiveness have not been fully explored. This study attempts to fill this gap by examining the impact of international acquisitions on firm competitiveness. Building on the resource-based view, internalization theory, agency theory and managerial hubris we propose that international acquisitions enhance competitiveness. We also develop a competing hypothesis about the negative impact of IAs on competitiveness using agency view, integration issues, and information asymmetry perspective. We test our model with a sample of acquisitions between 1985 and 2007. We find that international acquisitions have a positive effect on firm competitiveness. We also find variations in the impact of international acquisitions across different dimensions of competitiveness and benchmarks. We also investigate factors that affect the success of international acquisitions. Our evidence suggests that the acquirer's resources and capabilities play a crucial role in the success of international acquisitions. In the second chapter, we explore the association between acquisitions and CEO compensation from two different perspectives. Agency theory, which assumes a conflict between shareholders' and executives' interests, predicts a positive impact of acquisitions on CEO compensation. In contrast, subscribers of stewardship theory question the assumption of a conflict of interest and propose that acquisitions have no impact on CEO compensation. We test the prediction of agency view with a sample of U.S. acquisitions for the period 1995 to 2007. Our results provide evidence for the agency view. Unlike prior studies, this study distinguishes between international and domestic acquisitions, and assesses their impact. We find that international acquisitions have less of a positive effect on CEO compensation than domestic acquisitions. Finally, we investigate some deal characteristics and show that the relatedness of the acquirer and the target influences post-acquisition CEO compensation. We provide an in-depth literature review of acquisition research in the third chapter. In addition to discussing the antecedents, outcomes, and success/failure factors of acquisitions in general, we focus on international acquisitions as well. We discuss the differences between international and domestic acquisitions and review the literature of international acquisitions as a mode of entry. More important, we identify theoretical and methodological gaps, unanswered questions, trends, and understudied areas in acquisition research. Building on these, we provide recommendations and directions for future acquisition research. Overall, this study examines the implications of international acquisitions for firms. Our findings indicate that international acquisition is an important phenomenon that influences the competitiveness of firms and governance through effects on CEO compensation. One of the major contributions of this study is to show that international acquisitions have different characteristics than domestic acquisitions. Our study also identifies issues that need to be resolved in acquisition research and propose ways to address those issues. Our study adds fresh insights to the literature on M&As, competitiveness, and CEO compensation. / Business Administration/International Business Administration

The first essay shows that academic directors significantly increase firms' innovation. Following an academic director's death and relative to a non-academic director's death, the average firm reduces the number of citation-weighted patent applications by 30.7%. The number of patent applications also increases when an academic director becomes less busy after another company she holds directorship is acquired. Consistent with an advising channel, academic directors in STEM disciplines are particularly pro-innovation. In line with monitoring channels, firms with academic directors tend to dismiss CEOs who do not innovate and restrict real earnings management that waste financial resources. The relation between academic directors and innovation is not driven by PhD CEOs or non-academic PhD directors. Academic directors are associated with higher firm value at firms where innovation is more important but not at other firms. Overall, our results highlight the vital advising and monitoring roles academic directors play in corporate innovation. The second essay finds that pre-existing professional ties with a firm's board significantly increase a CEO candidate's probability of being hired by the firm. Considering all CEOs hired this year as potential candidates, a board-connection corresponds to a 152% increase in the probability the candidate is selected as CEO. Consistent with the hypothesis that boards select connected candidates to increase shareholder value, we find significantly greater firm performance improvement after CEO turnovers for firms hiring connected CEOs than those hiring unconnected CEOs. Further, the performance increases are significant only among firms with severe information asymmetry, large CEO termination risk, and high coordination costs. We also find that connected CEOs make better acquisitions than unconnected CEOs. These results suggest connected hiring increases firm performance because it reduces information asymmetry, CEO termination risk, and CEO-board coordination costs. Inconsistent with boards rendering favors to friends, connected CEOs are not awarded a larger pay package when they assume office. Overall, our results suggest that it pays for a firm to hire a CEO with pre-existing ties to the board. / Doctor of Philosophy / We see professors seating on corporate boards all the time. Why do firms hire them? Do they make firms innovate more because they have strong research orientation? The first essay finds that these directors enhance corporate innovation. They improve innovation with their STEM expertise. Because STEM disciplines are particularly relevant to production technology, they are able to advise the CEO about innovation. We also find that these directors make firms innovate more by linking CEO termination decisions to innovation and by preventing companies from wasting resources that could otherwise be used for innovation. Lastly, these directors improve firm value at firms where innovation is important. The board makes CEO recruiting decisions. We are interested in knowing (1) whether candidates are more likely to be hired if they already had a connection with the board; (2) whether these candidates outperform candidates without any connections. The second essay finds that having an acquaintance on the board helps a CEO candidate land the CEO position. We also find that these CEOs outperform CEOs without any connections. This is because there is little information gap between the connected CEO and the board. Also, the pre-existing connections allow the two parties to have better coordination.

While there is a wide body of literature examining the relation between CEO compensation and firm performance, few studies have directly tested the proposition that a strong pay-performance link: leads to improved future performance. This paper tests the hypothesis that a strong pay-performance link: leads to better managerial decisions. Following Jensen and Murphy's (1990b) methodology, pay-performance sensitivities are estimated for the CEOs of 105 NYSE and AMEX firms. The relation between the estimated pay-performance sensitivities and subsequent acquisition performance is examined for a sample of 140 acquisitions over the period 1980-86. Acquisition performance is measured by cumulative abnormal announcement returns for the event windows: [0], (-1,+1], [- 5, + 1], [- 5, +40], and [- 20, +40]. After controlling for other variables that are related to acquisition performance, a significant positive relation is observed between measures of pay-performance sensitivity and subsequent acquisition performance. The results suggests that a strong pay performance link may better align CEO and shareholder interest, and lead to improved future CEO performance. In addition, evidence is presented that suggests that optimal compensation design should jointly consider both stock options and traditional forms of compensation. / Ph. D.