Essays in Corporate Finance

The exorbitant compensation of CEOs has generated many media headlines and intense debate over the years. Since 2017, firms are required to report the ratio of the CEO pay relative to the median employee. Many people believe the intended purpose of the mandate was to name and shame firms into reducing CEO pay. My paper examines this topic and finds that the regulation had the opposite effect: firms increase CEO pay, mainly by increase performance-based compensation. These results are not innocuous, but also had consequences for financing and investment decisions.

Next, my thesis asks why religiosity has been shown to be related to corporate risk taking. Does the religious affiliation of the local employees create a risk averse corporate culture, or is the relationship driven by risk-averse consumers? We utilize the detailed financial statements of financial services firms and find evidence for both channels. The local culture channel is strong and robust, whereas we find support for the consumer-channel only when examining firms who have one large salient market.

Finally, my thesis studies why large investors simultaneously hold debt and equity in the same firm. My co-authors and I posit that holding debt can serve as a form of insurance for equity claims. We take advantage of a unique design which allows us to draw causal inferences. Our results provide support for our hypothesis.