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Permanent link (DOI): https://doi.org/10.7939/R3GH6N
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Three Essays in Capital Investment and Governance Open Access
- Other title
Leadership -- United States
Capital investments -- United States
Research, Industrial -- United States
Corporate governance -- United States
- Type of item
- Degree grantor
University of Alberta
- Author or creator
- Supervisor and department
Mehrotra, Vikas (Finance)
- Examining committee member and department
Vikas Mehrotra, Finance and Management Science, University of Alberta
Constance Smith, Economics, University of Alberta
Akiko Watanabe, Finance and Management Science, University of Alberta
Jennifer Kao, Accounting and Management Information Systems, University of Alberta
David Stangeland, Accounting and Finance, University of Manitoba
Faculty of Business
- Date accepted
- Graduation date
Doctor of Philosophy
- Degree level
This thesis presents three separate essays on capital investment and corporate governance. They include: (a) the consequences of acquiring overinvested firms during the post-bubble period in the US economy, (b) the appropriateness of corporate leadership structure in the US, and (c) the importance of financial and legal development for the return on R&D investment.
In the first essay, I examine whether there was any real economic gain from overinvestment following the US stock price bubble in the late 1990s. I find that several firms eventually acquired a number of overinvested firms at a relatively low price after the end of the speculative bubble. Furthermore, acquirers significantly improved their total factor productivity and operating performances during the post-acquisition period. I therefore suggest that overinvested assets of the late 1990s played a valuable role in corporate America even after the burst of the bubble in the stock market.
In the second essay, I investigate the question of whether splitting the roles of Chief Executive Officer and Chairman of the Board will improve a firm’s overall performance and whether the board of directors usually makes the right decision about leadership structure. I find that both combined and separate leadership firms employed an appropriate leadership structure for their own circumstances in the recessionary period (i.e., 2005), but not so during the boom time (i.e., 2000). However, under different business conditions, either of the leadership structures can produce relatively higher firm value.
In the third essay, I identify the channel through which finance and law may matter for economic growth. Results show that the degree to which the financial market and legal environment of a country influence the growth in productivity depends on whether R&D activities are heavily concentrated on either the government or the business sector of that country. Further analyses reveal that the rate of return on government-initiated R&D remains insignificant even in the presence of a high-functioning financial market and a strong legal environment across emerging and developed countries. In contrast, an active financial market and strong rights of shareholders and creditors are crucial for increasing the return of business-sector R&D.
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