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Essays in corporate finance

Wang, Su (2019) Essays in corporate finance. PhD thesis, The London School of Economics and Political Science (LSE).

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Abstract

This thesis explores the different mechanisms behind the heterogeneous success and growth rates of small and medium-sized enterprises. In the first chapter, I investigate the impact of manager turnover on the performance of young firms and examine how this impact varies with different ownership and control structures. To estimate the causal impact of manager departures, I exploit shocks to managers' outside options induced by an area-based policy in support of local businesses and compare firms with different ex-ante manager departure likelihood and different distance to policy regions. Using a novel manager shareholder matched dataset of young firms in the UK, I show that manager departure has a siginificant negative causal impact on the subsequent performance of young firms. Moreover, manager departure leads to a substantial decline in the assets of founder-managed firms and a significant increase in bankruptcy risks of non-founder-managed firms. The second chapter is co-authored with Dr. Juanita Gonzalez-Uribe. We use the Great Recession as a laboratory to dissect the implications of financial constraints in small firms. We exploit firm-level eligibility requirements for a credit guarantee scheme launched in the UK in 2009 as an exogenous determinant of financial access during the crisis. Using a difference-in-difference methodology, and novel small-firm data, we show that eligible firms relatively increased their borrowing, employment, sales, profits, and survival, but disinvested as much as non-eligible businesses. The results show that employment can be more sensitive to financial constraints than fixed assets, likely because fixed assets can be pledged as collateral whereas employees cannot. In the last chapter, I examine how the succession decisions in family firms are affected by the product market competition based on a sample of UK family firms in the manufacturing sector. Using import penetration to measure foreign competition and implementing the import-weighted exchange rate index as an instrumental variable, I find that intense foreign competition causes a significant increase in family manager departures. Specifically, departing family managers are unlikely to be replaced, whereas departing unrelated managers are more often replaced by unrelated managers.

Item Type: Thesis (PhD)
Additional Information: © 2019 Su Wang
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HG Finance
Sets: Departments > Finance
Supervisor: Paravisini, Daniel and Cuñat, Vicente
URI: http://etheses.lse.ac.uk/id/eprint/3998

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