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Three Essays on Corporate Finance

<p> Information intermediaries in financial markets improve firms&rsquo; financing and investment efficiency by reducing information asymmetries between firms and investors. The theoretical literature suggests that competition in information production could lead to more transparent information environment and more efficient resource allocation. In my dissertation, I empirically examine how competition among information intermediaries improves firms&rsquo; cost of financing and innovation. </p><p> In the first chapter, I study how competition among stock analysts affects firms&rsquo; product innovation outcomes by examining how analyst coverage, measured by the number of analysts following a firm, influences the introduction of breakthrough new products. Using brokerage house mergers and closures as quasi-experiments, I find that lower analyst coverage leads to fewer breakthrough new products. This positive effect of analyst coverage is concentrated among firms with lower initial coverage, higher growth opportunities, and among firms that have introduced breakthrough new products prior to the analyst shocks. </p><p> In the second chapter, we investigate how the arising of informed traders&mdash;short sellers, increases competition among information producers and reduces the role of banks as information monopolies. We use a regulatory experiment, Regulation SHO, which relaxes short selling constraints for a group of randomly selected stocks. We find that firms affected by SHO enjoyed a 21 basis point lower loan spread, while non-price loan terms of these treated firms were not affected. We also find that while firms without bank loan contracts exhibited a significant decline in stock prices upon the announcement of SHO, firms with bank loan contracts did not react. </p><p> In the third chapter, I study the impact of bank competition on the re-allocation of bank credits and innovation among industries. Using the Interstate Bank Deregulation as a shock to bank competition, I find that the average effect of bank deregulation on corporate innovation is negative. However, firms in R&D; intensive industries experienced significant increase in the number of breakthrough new products, patents and patent citations. </p><p>
Date08 September 2018
CreatorsLiu, Fangzhou
PublisherIndiana University
Detected LanguageEnglish

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