Three Essays in Corporate Finance

Three Essays in Corporate Finance

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In the second chapter I argue that the CEOs react to equity market mispricing by taking investment and financing decisions that maximizes the fundamental value of the firm. Using a direct measure of perceived mispricing, I empirically find that the firms invest more as perceived undervaluation increases. If the internal cashflows are not sufficient for these investments, she uses external finance. When the undervalued firm is not equity dependent its source of external finance is debt. However, if the firm is equity dependent, it uses equity to finance the investment. These results suggest that the CEO does not time or cater to the equity market.To control for financial constraints, I include book equity divided by total assets, current liability divided by total assets, and change in tangibility of assets. Also, size, and year dummies are included. I use industry dummies when I do not useanbsp;...

Title:Three Essays in Corporate Finance
Publisher:ProQuest - 2008

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