Essays on Empirical Corporate Finance

Thesis Defence
Essays on Empirical Corporate Finance

Chang Gong, PhD candidate in the PhD programme ESCP, publicly defended her PhD thesis in Management Sciences.

13 December 2022
ESCP Business School Campus République

Abstract

In the first essay, I study the impact of CEOs with financial work experience, namely financial expert CEOs, on a firm’s dynamic capital structure adjustments.

By analysing a comprehensive data set, I find that financial expert CEOs adjust leverage faster toward their targets. After addressing potential endogeneity concerns and considering deviation levels and cash flow conditions, the results hold. Additionally, I find that this positive effect is stronger when those CEOs are more powerful. Further evidence points to the existence of two likely channels in which financial expert CEOs influence leverage adjustments: knowledge and ability. Overall, the results enhance our understanding of the managerial effects on corporate decisions and the dynamic trade-off theory of capital structure.

In the second essay, I find that financial expert CEOs underperform in M&A.

CEOs with financial experience are bad bargainers and create fewer synergies with targets. They engage in fewer deals and prefer public targets. The results suggest that financial expertise comes at the expense of having expertise in other dimensions. Interestingly, when financial expert CEOs also have industry expertise, their financial expertise is the icing on the cake.

In the third essay, I examine the M&A behaviour of firms with female executives.

Companies with female executives acquire greener targets than those with male executives. Female executives prefer less polluting private targets. I explore measures of firm environmental performance, such as total toxic releases, environmental penalties, emissions-related words in 10-K filings, and green innovations.

The study suggests that women executives pay close attention to ecological concerns as they make financial decisions, especially when selecting targets for mergers and acquisitions. Female executives are more concerned about the environment than their male counterparts. Additionally, I do not find this prosocial behaviour at the expense of shareholders’ value.

Jury