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Essays in empirical corporate finance

Gorrín, Jesús (2018) Essays in empirical corporate finance. PhD thesis, London School of Economics and Political Science.

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This dissertation summarizes my work on how corporations adjust to both policy driven and random shocks. In the first chapter I document how corporate investment reacts to immigration. I use an interaction of ex ante clusters of immigrants and a change in immigration policy in the United Kingdom to provide evidence that the amount of investment increases in anticipation of immigration flows. The variation introduced by the immigration policy allows me to control for local economic shocks. Part of the increase in investment occurs through a transitory increase in fixed assets. The major change occurs in the extensive margin, through an increase in firm creation. The increase is larger for the knowledge and the service sectors, suggesting that human capital is an important driver of the effect. The results indicate that firms might quickly react to an immigration-induced labor supply shock. In the second chapter, Bernardo Ricca, Jose Morales and I explore the unintended consequence of the Mexican drug war. Using a similar strategy to Dell (2015), we show that close elections in which PAN (the party that implemented the war) cause a significant decrease in export growth. We also provide evidence that worker displacement is an important channel for the effect. In the third chapter I answer whether managerial experience explain investment to cash sensitivity. Using a unique, innovative hand-constructed database, this study estimates the sensitivity of investment to cash for European football managers with different experience. To avoid endogeneity issues, I exploit random cash awards to clubs. I estimate these random awards using ex-ante odds of matches. When odds are close, cash awards can be considered as good as randomly assigned. After a cash windfall, only managers with low experience spend more on new players. The increase in gross investment is not linked to better performance for the team.

Item Type: Thesis (PhD)
Additional Information: © 2018 Jesús Gorrín
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Departments > Finance
Supervisor: Paravisini, Daniel and Jenter, Dirk

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