“Corporate Financial Leverage: Firm vs. Industry Effects”
In this paper, I find that industry effects are an important determinant in firm financial leverage, contrary to what the literature suggests. I first confirm some recent research findings on weak industry effects in corporate leverage, and I then demonstrate that the documented weak industry effects are due in part to industry classification measurement errors and sensitivity to sample parameters. I adopt a more accurate, variable industry classification (TNIC3), instead of traditional fixed industry classification, and I find a substantial increase of 40% in industry effects. Additionally, I theoretically demonstrate why the methodology previously used in the literature is destined to find statistically weak industry effects. I conclude by running a simulation to confirm my theory. This paper has both theoretical and empirical components, which demonstrates my research interests and comfort with both theoretical and empirical research.
“Firm-level Equity Market Liberalizations: Firm Investment, Growth, and Performance”
With Andy Naranjo
There is no consensus on how firms in less developed financial markets are affected by gaining access to foreign investments. In this paper we examine firm-level equity market liberalizations through their initiation of Depositary Receipts and cross-listings for 35,000 firms across 100 countries from 1985 to 2015. A fundamental question is how firms in countries with less developed financial markets are affected by gaining access to foreign investments. In many instances, official country liberalization dates do not coincide with the dates when firms actually gain access to foreign capital, a discrepancy which often leads to inconclusive findings on the effects of liberalizations. Even when some researchers look at firm-specific events such as firms being added to an emerging market index, they do not focus on the introduction of DRs. Contributing to the prior research, we use an extensive array of unique recent data to examine the influence of firm-level liberalization through DR introductions on firm- and country-level growth and investment. We also examine the cross-sectional influence of country-level differences in institutional, regulatory, political and financial development factors on firm- and country level liberalization effects. In contrast to the mixed evidence for country-level liberalizations, we find that these firm-level equity market liberalizations result in an increase in firm investment, growth, and performance.
In this paper, I find that industry effects are an important determinant in firm financial leverage, contrary to what the literature suggests. I first confirm some recent research findings on weak industry effects in corporate leverage, and I then demonstrate that the documented weak industry effects are due in part to industry classification measurement errors and sensitivity to sample parameters. I adopt a more accurate, variable industry classification (TNIC3), instead of traditional fixed industry classification, and I find a substantial increase of 40% in industry effects. Additionally, I theoretically demonstrate why the methodology previously used in the literature is destined to find statistically weak industry effects. I conclude by running a simulation to confirm my theory. This paper has both theoretical and empirical components, which demonstrates my research interests and comfort with both theoretical and empirical research.
“Firm-level Equity Market Liberalizations: Firm Investment, Growth, and Performance”
With Andy Naranjo
There is no consensus on how firms in less developed financial markets are affected by gaining access to foreign investments. In this paper we examine firm-level equity market liberalizations through their initiation of Depositary Receipts and cross-listings for 35,000 firms across 100 countries from 1985 to 2015. A fundamental question is how firms in countries with less developed financial markets are affected by gaining access to foreign investments. In many instances, official country liberalization dates do not coincide with the dates when firms actually gain access to foreign capital, a discrepancy which often leads to inconclusive findings on the effects of liberalizations. Even when some researchers look at firm-specific events such as firms being added to an emerging market index, they do not focus on the introduction of DRs. Contributing to the prior research, we use an extensive array of unique recent data to examine the influence of firm-level liberalization through DR introductions on firm- and country-level growth and investment. We also examine the cross-sectional influence of country-level differences in institutional, regulatory, political and financial development factors on firm- and country level liberalization effects. In contrast to the mixed evidence for country-level liberalizations, we find that these firm-level equity market liberalizations result in an increase in firm investment, growth, and performance.