Abstract

This thesis examines two issues in corporate finance. The first two essays examine the influence of ownership structure on the relationship between ownership and firm value. The third essay examines the influence of an IPO on a firm’s lending arrangements.

In the first essay, we examine the influence of the presence of multiple blockholders on ownership-firm value relationship. Additional blockholders can either form a coalition with or monitor the largest individual blockholder. We hypothesize that both of these alternatives will influence the shape of the observed ownership-firm value relationship and the choice will be influenced by blockholder identity. We find that while individual blockholders tend to form a coalition, corporate blockholders tend to monitor. We also find that the coalition formation effect is more pronounced in non-founder firms. Our results suggest that the relationship between the ownership of the largest individual blockholder and firm value critically depends on both the presence and identity of additional blockholders.

In the second essay, we examine the influence of ownership structure on the observed relationship between inside ownership and firm value. We document the predominant type of this relationship for different types of ownership structures. Samples of firms with predominately individual blockholders tend to generate a convex relationship, while those with corporate presence generate a concave one. Thus, we find a much wider spectrum of inside ownership-firm value relationships than reported in prior studies. We show that much of the disagreement regarding the aforementioned relationship can be attributed to differing ownership structures of sample firms.

In the third essay, we examine changes in covenants and yields of bank loans around IPO and link them to the changes in the extent of loan syndication. We document significant changes in lending arrangements around IPO and show there are significant reductions in both covenant intensity and yields around a firm’s IPO. The decline in yields is driven primarily by firms that switch to syndicated loans after IPO. Our results suggest that, by allowing more firms to access the syndicated loan market, IPOs are influential in determining the covenants and yields on post-IPO bank loans.