Three essays in corporate finance and market microstructure

• Author / Creator

  Semenenko, Igor

• There are two opposing views on the role of regulation of financial markets examined in the academic literature. There is a large body of evidence that suggests that the efficiency of capital markets in North America is in large part due to investors’ confidence in the regulatory system. However, the optimal level of regulation is debatable.
  We investigate several aspects of the regulation of capital markets by exploring effects of changes in listing requirements on exchanges on the quality of firms undertaking initial public offerings and the quality of firms that choose to go public via a reverse merger mechanism. In addition, we show that additional regulation and/or disclosure of trading activies of informed investors in tender offers may be warranted.
  We show that a gradual increase in listing requirements fails to prevent low quality firms from gaining access to public capital markets. Yet, differences in listing rules on uppers and lower tiers of exchanges create a dual listing regime, which allows higher quality firms to differentiate themselves.
  We observe migration of most of the reverse merger transactions to the over-the-counter market due to changes in the regulatory environment in 2001. We conclude that regulatory changes had broad negative effects on the reverse mergers market as these pushed reverse merger firms to a less regulated and more opaque marketplace. Separately, we examine the timing of reverse mergers. Our results suggest that two types of reverse mergers follow different timing patterns: private firms go public through merger with financially distressed firms when IPO windows are closed, whereas reverse takeovers in which the participating public company is a going concern are pro-cyclical to aggregate merger waves.
  Finally, we analyze tender offers over the period from 1993 through 2006 and establish a link between non-public information and informed investors’ strategic behaviour. Our findings call in question the effectiveness of disclosure mechanisms of trading by informed investors. We also note that uninformed traders can use market microstructure tools to expand their information set, thus increasing the speed of incorporation of new information into stock prices and increasing market efficiency.

• Subjects / Keywords

  • Tender offers
  • Reverse mergers
  • Initial public offerings
  • Listing requirements

• Graduation date

  Fall 2009

• Type of Item

  Thesis

• Degree

  Doctor of Philosophy

• DOI

  https://doi.org/10.7939/R3530F

• License

  This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.