Essays on Corporate Finance

In the first chapter, I study how corporations leverage voluntary disclosure to illuminate the murk arising from business complexity. I find that conglomerates compensate for their business complexity by strategically disclosing more information voluntarily. This finding becomes more pronounced under heightened information demands from stakeholders and analysts or when the pay-performance sensitivity is higher. The enhanced transparency serves as a strategic move, yielding tangible benefits in the form of improved firm valuation and decreased capital costs. Overall, my study illustrates that multi-segment firms tactically deploy voluntary disclosure to offset the potential detriments of their business complexity.

In the second chapter, I study the efficacy of environmental enforcement in powering down pollution and investigate how management in the US electricity sector navigates such enforcement. Analyzing data from power plants, I find that facilities targeted by the EPA tend to reduce pollution emissions and electricity production. Managerial responses to these challenges involve strategies, including installing scrubbers, enhancing pollution abatement efforts, investing in energy-efficient generators, and reducing coal-fired electricity production. These changes are facilitated by the organizational structure of utility firms and the economies of scale in fuel acquisition, the availability of financial resources, environmental agencies undertaking enforcement, and utility firms' regulatory status. While heightened regulatory compliance costs do not significantly impact the financial performance of firms, they ultimately result in higher electricity prices for consumers, reflecting a transfer of the financial burden.

In the third chapter, I aim to unveil the role of lobbying activities in creating a nexus between corporations and their institutional shareholders and trace the footprints of lobbyists in mutual funds voting. This chapter investigates whether mutual funds exhibit a preference for portfolio companies with which they have shared lobbyists and assesses how this preference impacts their voting behavior. I uncover that connected institutional shareholders exhibit a higher propensity to vote in concurrence with company management—especially when such votes carry significant managerial value. Following these voting events, I observe that higher connected mutual fund support is negatively associated with abnormal return. Overall, my findings indicate that management might strategically leverage shared lobbying relationships to influence shareholder voting patterns.