Three Essays in Corporate Finance and Informed Trading

Abstract

This dissertation examines how uncertainty, organizational capabilities, and information networks shape corporate investment, international acquisitions, and institutional investor behavior. Using novel identification strategies and granular data across multiple institutional settings, it provides new evidence on how firms and financial intermediaries respond to uncertainty and exploit private information around major corporate events.

The first essay examines how central bank governor transitions influence corporate investment. Exploiting predetermined leadership transitions that generate exogenous policy uncertainty, it shows that firms reduce investment in anticipation of governor turnover, particularly in interest- and exchange-rate-sensitive industries, with effects attenuated in countries with stronger central bank independence.

The second essay studies the role of organization capital in international acquisitions. Firms with higher organization capital are more likely to undertake international acquisitions and create greater shareholder value following deal completion, highlighting the importance of intangible organizational capabilities in successful international expansion.

The third essay provides transaction-level evidence on mutual fund trading around mergers and acquisitions. Mutual funds accumulate target shares before public announcements and earn substantial profits from these trades. Profitability is significantly higher when trades overlap with corporate insider activity, when affiliated investment banks advise transaction parties, and when funds are geographically closer to event firms.

Overall, the dissertation contributes to the literatures on monetary policy uncertainty, organization capital, and informed trading by demonstrating how uncertainty, organizational capabilities, and information networks shape investment decisions, corporate strategy, institutional investor behavior, and ultimately asset prices.