Three essays on empirical corporate finance.

Summary This doctoral dissertation consists of three essays on several topics in the field of empirical corporate finance. Essay 1 studies the informational advantage of independent directors with industry expertise versus independent directors without such expertise. To do so, I look at the profits from so-called "insider" trades made by independent directors. I find that independent directors with industry expertise earn significantly higher profits than independent directors without such expertise. Moreover, an increase in the proportion of independent directors with relevant industry expertise on the board is associated with better alliance performance, greater likelihood of successful M&A transactions, and less sensitivity of the firm's investments to market prices. The results as a whole suggest that industry expert directors have superior knowledge of the firm and may improve the effectiveness of the board in performing its oversight and advisory functions. Essay 2 studies the detrimental effect of short selling activity on customer-supplier relationships. We show that the amount of short selling of a supplier's stock is positively associated with a higher probability that a major customer of the supplier will terminate the business relationship between the two. Such an interruption can be partially prevented by the presence of "block" holders of stock in the supplier's firm, especially if these holders have a long-term orientation. Our results are consistent with the hypothesis that short sellers can disrupt a firm's relationship with commercial counterparties through the so-called "feedback" effect, that is, the fact that market prices affect the firm's decisions. On the other hand, the presence of "blockholders" is an effective mechanism to counteract this disruption. Essay 3 examines possible reasons for the increasing rate of "bundled" takeover announcements, in which the acquirer's management announces an impending acquisition on the same day that the acquirer reports its quarterly results to the market. This practice seems odd given that bundled deals have significantly lower acquirer announcement yields, regardless of the target's status. Our results point to the "strategic information disclosure" hypothesis as the most likely reason why firms choose to bundle acquisition and earnings announcements. These acquirers, faced with weak earnings, led by recently appointed CEOs, and in a situation of analyst challenge and uncertainty, use bundled announcements as a tool to influence the market's reception of their performance.