Ordõnez-Calaf, Guillem (2017) Essays in corporate finance. PhD thesis, University of Warwick.

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Abstract

Chapter 1 shows how blockholder disclosure thresholds regulate market transparency and, in turn, hedge fund activism. We characterize how disclosure thresholds structure the complex interactions between (a) initial investors in a firm who value the value-enhancing disciplining effects of activism on management, but incur costs trading with activists who know their own value-enhancing potential; (b) activists value who value higher thresholds when establishing equity stakes, but incur costs if high thresholds reduce real investment or discourage managerial misbehavior; and (c) firm managers who weigh private benefits of value-reducing actions against potential punishment if activists intervene. When managerial behavior is sufficiently unresponsive to threats of activism, initial investors and society value tighter disclosure thresholds than activists whenever the costs of activism tend to be low, making the probability of activism insensitive to the level of activist trading profits. In contrast, activists value tighter thresholds when managerial behavior is responsive to potential activism.

In Chapter 2 we model a novel coordination problem between the shareholders of a company receiving a takeover over. The willingness of a Board to defend itself from a takeover bid is reduced the greater the proportion of shareholders who sell-out early. Sophisticated shareholders therefore face a coordination problem; and their actions generate a novel feedback loop between the volume of shareholder sales and takeover outcomes. We use global games to derive and analyse the unique threshold- equilibrium. We show that rules which strengthen Boards' discretion to make takeover judgments, or which weaken new shareholders' voting power, encourage shareholders to sell early; and that incentives to politically pressure Boards are greatest in jurisdictions with the greatest respect for shareholder rights.

Chapter 3 recognizes that firms’ debt capacity affects their ability to compete in the product market, and the competitiveness of firms in the product market determines their ability to secure debt. I model the endogenous relation between product market competition and financial constraints by characterizing a trade credit transaction where a competitive retailer has incentives to not honour the debt extended by its supplier. With linear input prices, credit rationing arises endogenously in equilibrium if competitive pressure is strong enough. I show that a financially constrained retailer faces a lower price, and it can make higher profits due to its own financial constraints. With non-linear prices, the retailer might never be constrained, even though contractual frictions affect market outcomes.

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HG Finance
Library of Congress Subject Headings (LCSH):	Stockholders, Hedge funds, Consolidation and merger of corporations, Executives
Official Date:	September 2017
Dates:	Date Event September 2017 UNSPECIFIED
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Thanassoulis, John ; Bernhardt, Dan ; Glazer, Jacob
Extent:	164 pages : charts
Language:	eng

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