Empirical Essays in Corporate Finance and Financial Reporting Defended on Thursday, 18 September 2008
The thesis consists of four empirical studies in the areas of corporate finance and financial reporting. The first study examines CEOs’ familiarity with segments and how that familiarity affects their divestiture decisions. The results show that longer-tenured CEOs divest assets about half as often from familiar segments as from non-familiar segments. The study also shows that the familiarity effect is costly. The second study examines a firm’s selection procedure of financial advisors, including the choice of advisor nationality and experience, when making a cross-border acquisition. Characteristics of both the target and acquirer-nation, such as formalism, financial sophistication, and investor protection influence the acquirer’s choice of advisor nationality. Global- and target-country experience of an advisor serves as a substitute for the acquirer’s own cross-border acquisition experience, but advisors from either the target or acquirer nation create most value. The third study investigates management earnings forecasts disclosed by Dutch firms and how a cross listing in the US or UK influences managers’ forecast specificity choice and the ex post forecast errors. The results indicate that greater legal exposure and scrutiny causes firms to disclose less precise, but more accurate, forecasts. The final study examines analysts’ preferences for firms’ corporate financial reporting practices, which are confronted with the perceptions and actions of CFOs. Although we find that analysts’ views frequently correspond with those of CFOs, we also find some remarkable differences. Analysts tend to focus on long-term reporting strategies, while CFOs tend to make reporting decisions, and related investment and financing choices, with short-term consequences.
familiarity, divestitures, internal capital markets, knowledge, illusion of control, entrenchment, cross-border acquisitions, financial advisor, earnings benchmarks, earnings smoothing, voluntary disclosure, management earnings forecasts, cross listing