Date of Graduation

8-2018

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Finance

Advisor/Mentor

Jandik, Tomas

Committee Member

Yeager, Timothy J.

Second Committee Member

Hsu, Scott

Abstract

Behavioral and managerial biases can occur among corporate executives that lead to suboptimal decision making and outcomes for the shareholders. In the first essay, I study how the personal networks of CEO affect the performance of the firm in the context of IPO. I find that CEOs at higher social hierarchical positions can allow managerial entrenchment and prevent dismissal. The findings show that influential CEOs are associated with higher IPO underpricing, lower likelihood of positive offer price revision, and lower likelihood of wealth creation for the pre-IPO shareholders. In the second essay, I explore how the social connections between bidder and bidder advisors affect M&A outcomes. I show that the M&A deals with a bidder-bidder financial advisor connection exists have a lower CAR at announcement than the deals without such connections. I also show that M&A deals advised by personally connected financial advisor are more likely to complete but are executed less efficiently in terms of time to resolution. I find evidence that both the bidder CEO and the financial advisor receive higher cash bonus and advisor fees, respectively, when there are bidder-bidder financial advisor connections exist. Behavioral bias can also occur among individuals and lead to asset bubbles, especially in an environment with widely available credit and increased wealth inequality. In the third essay, using an experimental approach, I study how wealth inequality, leverage, and the effect that people trying to keep up with the status benchmark, which is so called “Joneses effect”, affect the asset bubbles. I find that unequal initial endowments and the presence of a Joneses effect lead to substantial overpricing as compared to situations where only unequal initial endowment or both factors are absent.

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