Three essays on empirical corporate finance

Lagaras, Spyridon

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Description

Title

Three essays on empirical corporate finance

Author(s)

Lagaras, Spyridon

Issue Date

2018-04-13

Director of Research (if dissertation) or Advisor (if thesis)

Almeida, Heitor

Doctoral Committee Chair(s)

Almeida, Heitor

Committee Member(s)

• Huang, Jiekun
• Tsoutsoura, Margarita
• Xuan, Yuhai

Department of Study

Finance

Discipline

Finance

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Corporate Finance
• Labor
• M&As
• Corruption
• Growth
• Reallocation
• Family Firms
• Cost of Debt

Abstract

This thesis consists of three essays that examine empirical questions in corporate finance and labor markets. In the first essay, I use a matched employer-employee dataset linked with hand-collected data on M&A activity in Brazil to examine how rms reorganize their labor force after takeovers. I show that M&As are associated with a significant decline in employment and total wages of target firms through increased layoffs, limited hiring and occupational consolidation. Low-skilled labor is particularly affected, while firms experience voluntary exit of high-skilled labor. Post-takeover average wages decline only for low-skilled workers. Employees that perform routine occupational tasks experience a higher likelihood of involuntary separation in transactions where the acquirer is a foreign firm. Finally, I provide evidence that occupational overlap is a key channel of increased layoffs: workers in occupations that overlap with occupations in the acquiring firm exhibit a higher likelihood of being fired. The relative increase in the demand for high-skilled and non-routine labor and the heterogeneous impact of M&As on wages leads to an increase in within- firm wage inequality. Overall, my results are consistent with a neoclassical efficiency seeking view of M&As. The second essay examines the link among corruption, firm growth and labor reallocation. Corrupt practices in the assignment of government contracts are largely diffused and can generate misallocation of resources across firms. I study how disclosure of such practices affects firm growth and labor reallocation. I exploit exogenous variation in the exposure of illegally favored firms using random municipality audits by a large anti-corruption government program in Brazil. Firms exposed by the auditing program experience a decline in employment growth relative to their peers. I document that young, less educated workers that do not occupy a managerial position have higher probability to leave the exposed firms. Released workers tend to reallocate to firms not found to be illegally favored. Within-sector firm size dispersion decreases in audited municipalities with respect to non-audited ones. My evidence suggests that random auditing programs can reduce labor misallocation across firms. The third essay investigates the effect of founding-family control on the cost of bank debt. Specifically, I examine the cost of accessing the syndicated market by using the financial crisis and the unexpected nature of Lehman Brother's collapse as a laboratory in order to tease out the effect of family control. I find the increase in loan spreads around the Lehman crisis was at least 24 basis points lower for family firms. Furthermore, the gap in spreads among family and non-family firms becomes wider among firms that had pre-crisis relationships with lenders with higher exposure to the shock. The evidence is consistent with family control lowering the cost of accessing debt financing, especially when lenders are constrained. I further investigate potential channels that drive the effect of family control. I provide novel evidence that for 17% of the family rms creditors impose explicit restrictions in private credit agreements that require the founding family to maintain a minimum percentage of ownership or voting power. Thus, creditors value the presence of the family. Furthermore, the impact of family control on lowering the cost of bank debt is higher when family CEOs run the rms and among rms with higher ex-ante agency conflicts.

Graduation Semester

2018-05

Type of Resource

text

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Copyright 2018 Spyridon Lagaras

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