Essays in corporate governance and institutional investing
Abstract
This dissertation comprises of three essays. The first essay (Chapter 1) compares the skills of female directors hired as a result of California gender quota and female directors hired as a result of the diversity initiative by the Big three institutional investors. In the second essay (Chapter 2), I study the private investments of sovereign wealth funds (SWFs). In the final essay (Chapter 3), I empirically document the relationship between SPAC mergers that take place late in the life of the SPAC and “value destroying” new business combinations.
In Chapter 1, I explore the functional expertise of female directors nominated as a result of a) California SB 826, which required a mandatory quota of female directors on California-based firm boards, and b) an institutional campaign initiated by Blackrock, State Street, and Vanguard (Big 3) to hire more female directors. Consistent with Kim and Starks (2016), I find that female directors are more likely to bring a unique skill to boards when compared to their male counterparts. However, using a difference-in-difference approach, I find that female directors nominated in response to SB 826 are less likely to bring unique skills to boards and have a lower level of skills compared to other female directors. I find no such effects for female directors hired as a result of the Big 3 campaign. These results suggest that the channels for gender diversity initiatives play a crucial role in the outcomes of such reforms.
Sovereign Wealth Funds (SWFs) have grown from $1.28 trillion assets under management (AUM) by 62 funds in 2000 to $11.28 trillion AUM by 169 funds in June 2022. Their growth has made SWFs important international investors. Other than the increase in AUM, SWF’s have also increased their allocation to private equity. The average allocation to private equity by the top 100 SWFs has increased from 14 percent in 2008 to 24 percent in 2022. In Chapter 2, I analyze direct investments made by SWFs in private companies which are classified as VC portfolio companies. This is the first study to look at SWF private investments at the deal level. I find that SWFs are more likely to invest in later stages of a venture; when investing outside their home region and they are also more likely to invest to co-invest with a reputable VC. Moreover, they are also more likely to invest in overseas ventures that have previously received funding from a reputable VC fund. These results hold regardless of if reputable VC is the lead investor or not. The results are robust to different measures of VC reputation and the instrumental variable approach.
In Chapter 3, I use duration analysis to empirically document the relationship between SPAC mergers that take place late in the life of the SPAC and “value destroying” new business combinations. My investigation is guided by a target acquisition model which provides the optimal minimum value for a potential merger partner. Furthermore, the solution’s comparative static behavior reveals an incentive for sponsors to deviate from their original assurances of target quality to investors. If this misalignment of incentives influences the decision making of managers, it should be reflected in the data. My maximum likelihood estimation produces a positively sloped and convex hazard function which documents an enhanced likelihood of an “uncoupled” SPAC merging as maturation threatens. This result suggests that to the detriment of SPAC investors, sponsors have lowered the optimal threshold value of the target to avoid losing their “promote.” To support my prima facie evidence, I examine the statistical relationship between the timing of SPAC mergers and the ROAs for the new business combinations as well as the “buy and hold” common stock returns.
Collections
- OU - Dissertations [9348]