Essays in empirical corporate finance

Tu T. Nguyen

doi:10.17918/etd-4281

This dissertation consists of two chapters related to mergers and acquisitions and one chapter studying the composition of the board of directors. For the first chapter, entitled "Acquisitions by CEOs with supply-chain expertise", I study how the experience of the bidding CEO in the targets supply chain related to the acquirers gain from the deal. I find that acquisitions by CEOs with this supply-chain experience exhibit higher acquirer abnormal returns at deal announcement. Supply-chain expertise is also associated with improved long-term operating performance at the merged firm. In general, my findings indicate that acquisitions by CEOs with expertise in the targets supply chain generate substantial gains for the acquiring shareholders. The second chapter (co-authored with Eliezer Fich and Micah Officer), entitled "Large wealth creation in mergers and acquisitions", examines completed M&A deals with large bidder shareholder dollar wealth gains at announcement. Our results show that large-gain acquisitions are (i) typically "bolt-on" deals that are small relative to the acquirers size; (2) transaction-specific events (not firm- or CEO-specific events); (3) enhanced by synergies from a strategic fit in the supply chain; and; (iv) executed by bidders with high valuation multiples. Many of these findings, which differ from those in the existing literature, provide important insight into the factors associated with considerable wealth creation for acquirer shareholders in M&A deals. The last chapter (co-authored with Jie Cai), entitled "Efficacy of board monitoring: evidence from the appointments of outside directors who have fired CEOs", examines new board appointments of outside directors who have fired a CEO at a different firm (henceforth CEO ousters). We document that poorly performing firms are more likely to appoint CEO ousters and experience more positive market reaction to these appointments. These firms also exhibit a significant increase in stock and operating performance, as well as in CEO turnover-performance sensitivity after a CEO ouster joins the boards. Overpaid CEOs experience significant decrease in their pay after a CEO ouster joins the compensation committee of a board. Our evidence sheds new light on the efficacy of board monitoring.

Essays in empirical corporate finance

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Essays in empirical corporate finance

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