ORCID ID
0000-0002-5767-8774
Date of Award
Spring 5-2021
Degree Type
Dissertation
Degree Name
Ph.D.
Degree Program
Financial Economics
Department
Economics and Finance
Major Professor
Mohammad Kabir Hassan
Second Advisor
Tarun Mukherjee
Third Advisor
Naka Atsuyuki
Fourth Advisor
Walter Lane
Fifth Advisor
Arja Turunen-Red
Abstract
In the first chapter, using political corruption conviction data from the U.S. Department of Justice, I examine the impact of local corruption on firms’ debt maturity structure while exploring both demand-side and supply-side explanations. My results support the demand-side story and indicate that firms located in high corruption areas utilize less short-term debt to mitigate liquidity and refinancing risks. Consistent with this, I find the effect is more pronounced among firms with smaller size, lower asset redeployability, and higher volatility. My findings remain robust to the inclusion of an array of controls expected to influence debt maturity preferences as well as time, industry, and state fixed effects. Moreover, a seemingly unrelated regression approach, instrumental variables regression, propensity score matching, and placebo analyses corroborate my findings. Altogether, my results indicate that firms alter their debt maturity choices in response to local corruption to limit refinancing risk and the uncertainty created by corrupt government officials. In the second chapter, I investigate the effects of firm-level political risk on corporate investments and operating performance. I find that diversified firms are better able than focused firms in mitigating idiosyncratic political risk. Diversified firms accomplish this feat via efficient use of the internal capital market that allows segments to alleviate political risk adversity. When exposed to political risk, diversified firms do not spend more on lobbying and political donations than the focused firms in the subsequent period, implying that diversified firms do not manage political risk politically. The main findings are robust to a battery of endogeneity tests.
Recommended Citation
Karim, Mohammad Sydul, "Mapping the Impacts of Political Risk in Corporate Finance: A Firm-Level Diversification and Debt-Maturity Perspective" (2021). University of New Orleans Theses and Dissertations. 2865.
https://scholarworks.uno.edu/td/2865
Rights
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