Finance and Financial Management Commons^™

Three Essays On The Financial Capital Markets, Diep Nguyen

Electronic Thesis and Dissertation Repository

This thesis is comprised of three integrated studies highlighting the financial capital markets and corporate finance decisions in response to market conditions.

The first study (Chapter 2) looks at the stock-like/bond-like behavior of Canadian income trusts, in particular how the sensitivities of income trusts’ returns to stock and bond market factors change over time, around different events, and depending on corporate strategy and firm characteristics. We find that income trusts are priced more like bonds compared to matched corporations before a surprise announcement that removes the tax advantage of income trusts (the Tax Fairness Plan announcement), while they become more …

Three Essays On Structural Models, Xinghua Zhou

Electronic Thesis and Dissertation Repository

My thesis includes three papers on contingent claims valuation of corporate securities using structural models of credit risk. Our study focuses on structural models and their applications in estimating damages in security class actions, option pricing and warrant pricing. Securities class actions typically involve some misrepresentation by a firm that overstates its true value. In securities class actions econometric models are used to assess damages to shareholders. However, studies on measuring damages for debt-holders are limited. My first paper uses a modified Merton framework to measure the impact of misrepresentation on the value of other components (e.g., debt, warrants) of …

Industry Tournament Incentives, Zhichuan Li

Business Publications

We empirically assess industry tournament incentives for CEOs, as measured by the compensation gap between a CEO at one firm and the highest-paid CEO among similar (industry, size) firms. We find that firm performance, firm risk, and the riskiness of firm investment and financial policies are positively associated with the external industry pay gap. The industry tournament effects are stronger when industry, firm, and executive characteristics indicate high CEO mobility and a higher probability of the aspirant executive winning.

Risk-Adjusted Inside Debt, Zhichuan Li, Shannon Lin, Shuna Sun, Alan Tucker

Business Publications

Compensation theory holds that executive aggression is related to both the level and riskiness of “inside debt” - promises from firms to pay their executives fixed sums of cash in the future, including pensions and deferred compensation. However, previous researchers have only examined the level of inside debt. We provide an inside debt metric that is conceptually superior to previously used metrics, as it incorporates the riskiness of inside debt. For the entire sample, our metric offers modest improvement in fit over past metrics, where the dependent variable is future equity return volatility. Furthermore, the relation between future volatility and …