Essays in corporate finance

This dissertation contains two essays.;In the first essay, I study the effects of voting by mutual funds on CEO compensation after a merger or acquisition (M&A). Prior literature shows that CEOs benefit from engaging in M&As even when the M&As do not benefit the shareholders. Poor governance appears to be a contributing factor in a CEO’s ability to extract rent through the M&A process. Shareholders have an interest in combating this agency issue. I study the influence of mutual funds, the largest shareholders. Mutual funds can influence the compensation of the acquiring firms’ CEO through two actions: voting against management and voting with their feet. Results show that mutual funds do successfully mitigate CEOs’ ability to extract rents during the M&A process by voting against management. This effect is strongest among firms owned by higher numbers of monitoring funds.;In the second essay, I examine the information embedded in the three day volatility around an M&A announcement. Volatility can reflect the probability of deal completion, the time to deal resolution, and the CEO tenure subsequent to deal completion. For bad acquisitions, lower volatility indicates investors’ agreement that the acquisition lowers the value of the firm; therefore, these acquisitions should have lower probability of completion. Complexity of a deal can lead to longer time to deal resolution as well as higher volatility. Disagreements regarding synergies the CEO can create through the merger signify the potential private information the CEO has regarding the merger. Therefore, the firm should allow the CEO more time to divulge his capabilities. The results show that volatility is positively related to probability of completion among bad deals. Volatility also correlates positively to the time to resolution and CEOs’ tenure subsequent to deal completion. Additionally, I find that the relationships between volatility and both deal completion and CEO tenure are prominent for firms with good governance. These findings show that three-day volatility contains information regarding firm decisions after the deal announcement.