Three essays in corporate finance

This dissertation is composed of three essays in corporate finance. The first essay studies the relationship between the management quality of a firm and various aspects of its IPO. Even though the quality of a firm's management has been widely used by venture capitalists and other practitioners in assessing its viability in its early life, the relationship between management quality and IPO performance has received little attention in the academic finance literature. This paper is the first to study this relationship. First, it studies the relationship between the firm's management quality and the reputation of the underwriter taking it public, as well as the direct and indirect costs of going public. Second, it studies the relationship between the firm's management quality and extent of institutional interest in the firm after the IPO. Third, it studies the relationship between management quality and three dimensions of the firm's performance after the IPO: initial returns (IPO underpricing), post-IPO long-term stock performance, and post-IPO operating performance. The empirical results suggest that management quality is an important determinant of all of the above aspects of a firm's IPO.; The second essay (co-authored with Thomas Chemmanur) conducts a direct test of the double-sided asymmetric information hypothesis regarding the choice of the medium of exchange in acquisitions. This is the first study to conduct a direct test of the asymmetric information hypothesis on the acquirer side, and also the first to test whether the choice of the medium of exchange is driven by double-sided asymmetric information: i.e., whether both the acquirer and the target have asymmetric information about their values. The empirical results suggest that acquirers that choose stock as a medium of exchange are overvalued, that valuation errors influence acquirers' choice between cash and stock and that a greater extent of informational asymmetry about the target firm leads to a greater likelihood of a cash acquisition.; The third essay (co-authored with Thomas Chemmanur) studies the issuance of tracking stocks and compares it with spin-offs and equity carve-outs. It tests the importance of the two groups of motivations that could potentially give rise to value and performance increments following the three forms of corporate restructuring: those related to asymmetric information and those related to corporate control and incentive considerations. The empirical results suggest that the main motivation for the issuance of tracking stock is the preservation of synergies between the business units involved, while reaping the benefits arising from a reduction in asymmetric information about the combined firm.