Three essays in corporate finance

This dissertation contains three essays in the broad area of corporate finance.;In the second essay, we investigate the relationship between investor response, measured by the initial day returns and the offer price revision, and SEO lockup agreements. We find that the use and length of SEO lockup agreements increase the initial day returns, but the use of a lockup agreement is not positively related to the offer price revision. We interpret these results as evidence that investors from the secondary market value the lockup positively, while investors from the primary market do not. This paper provides some evidence to support the argument that an SEO lockup agreement serves as a commitment device. Our findings, however, do not suggest that lockup agreements signal good firm quality in seasoned equity offerings.;Essay three focuses on the direction of earnings management and analyzes how the different incentive parts of CEO compensation affect earnings management. After we break down the compensation incentive into different components, the test results support our strategic manipulation predictions. CEOs with more vested options tend to engage in aggressive earnings management so that they can inflate the stock price and the realized value from option exercises. However, both newly-granted unvested options and common equity holdings are associated with income decreasing earnings management, suggesting CEOs reserve earnings to give them more leverage to manipulate earnings in the future when they can and want to cash these options and common equity.;In essay one we investigate the motivations for the early exercises of executive stock options by focusing on the exercises on the vesting date. We find that executives tend to exercise their stock options early, especially on the vesting date. Our results provide strong evidence supporting the wealth risk management hypothesis that executives with a higher degree of risk aversion, larger demands for liquidity and rebalancing, and riskier underlying stocks are more likely to exercise their executive options on the vesting date. Further, vesting exercises are also motivated by negative private information regarding post-vesting long term performance.