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Abstract

This thesis includes three essays in corporate finance and corporate governance. In the first paper, we investigate the redistribution effects among firm stakeholders of increased antitrust scrutiny. Using the cases opened by the European Commission between 1991 and 2019, we find that cartel investigations temporarily reduce profits for all firms in the affected industry and increase profits for their customers. In response to the negative shock to their profitability, firms engage in intense restructuring: they undertake mass layoffs and reduce employment; to lesser extents they increase leverage, cut investment and sell assets. The effects tend to be concentrated in firms that are less productive and closer to financial distress at the time of the shock.

The second paper investigates how shareholder protection affects an important stakeholder, labor. I examine the changes in firms’ employment decisions around the staggered passage of the Universal Demand (UD) law - a law that weakens shareholder litigation rights and reduces managers’ litigation risk. My findings document an increase in corporate employment following the UD adoption, which can be explained by managers’ risk taking. The UD-induced workforce expansion is concentrated in firms that rely more on high-skilled labor, indicating a potential improvement in their labor structure. On aggregate, the workforce expansion is inefficient and harms shareholder interests.

The third paper presents new evidence that corporate customers play a governance role in disciplining managerial behavior. Using a comprehensive dataset of customer-supplier relationships, we show that major downstream firms respond to upstream firms’ EPS manipulation - instrumented by variations in the incentive to manipulate - by severing business relationships. Ex ante, the threat of withdrawal by major customers appears to deter upstream firms from engaging in EPS manipulation. Suppliers with short-term incentives strategically reallocate trade credit among customers to retain their largest customers, which mitigates the ex-post impact of customer governance.

Publication Type:	Thesis (Doctoral)
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Bayes Business School Doctoral Theses Bayes Business School > Finance Doctoral Theses

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