Essays in Corporate Finance

My thesis makes use of uniquely created datasets through texts in publicly disclosed financial statements to make contributions to the field of finance. While the operations of U.S. firms are rapidly increasing overseas, the corporate finance literature has largely ignored the effects of firms’ international exposure and its heterogeneity on their financial structure. Building the firms’ offshore sales network using the textual data from their annual statements, my research evaluates firms’ debt capacity and examines how offshoring provides opportunities for firms to mitigate cash flow risk and increase debt levels.

Another part of my thesis examines the impact of firms’ culture, as measured by religiosity, on the choice of explicit (implicit) contracting of their Chief Executive Officers. Using the unique hand-collected data on comprehensive employment contracts from the firms’ financial statements, we find a highly significant negative association between religious social norms and explicit employment agreements. The results suggest that religiosity mitigates opportunistic behavior or incentives to violate the contract terms.

Finally, we use a uniquely ideal laboratory of S&P 1500 firms’ headquarter relocations to examine its effect on entrepreneurial growth. Using the staggered movements of headquarters in a metropolitan region as a shock to the local economy, we find that the incoming headquarter in the region boosts the entrepreneurial activity, as can be observed in increased investments in portfolio companies, their successful exits through IPOs and the increased supply of venture capitalists. The results strongly and robustly predict a shift in the economic growth of a region post a new headquarter entry.