Essays on International Corporate Finance

The first chapter examines whether and how concentrated stock markets dominated by a small number of large firms affect economic growth. Using data from 47 countries worldwide relating to the period 19892013, I show that a countrys stock market concentration is negatively related to capital allocation efficiency, which results in sluggish IPO activity, innovation, and economic growth. These findings suggest that the structure of a concentrated stock market indicates insufficient funds for emerging, innovative firms; discourages entrepreneurship; and is ultimately detrimental to economic growth. In the second chapter, we challenge the finding of Weld, Michaely, Thaler, and Benartzi (2009). They find that the average nominal price of stocks listed on New York Stock Exchange and American Stock Exchange has been approximately $25 since the Great Depression and that this nominal price fixation is primarily a U.S. or North American phenomenon. Using a larger data set from 38 countries, we show that the nominal share prices of most stocks in every country are meanreverting and their best predictor is the beginning of sample period nominal stock prices. We demonstrate that corporate actions maintain these nominal stock price anchors. The third chapter investigates the executive pay gap between public and private firms. We find that the executive pay gap escalates when there is less supply in potential competent executives, when shareholders power is stronger, and when a stricter rule on monitoring and disclosure is enacted. These findings largely support the view of the competitive executive labor market hypothesis that executive compensation is determined by market forces and increases when executives bear additional risk. The findings are inconsistent with the argument of the entrenchment hypothesis.