Essays in Dynamic Corporate Finance

Simple item page
dc.contributor.advisorKumar, Praveen
dc.contributor.committeeMemberYerramilli, Vijay
dc.contributor.committeeMemberSusmel, Raul
dc.contributor.committeeMemberKhumawala, Saleha B.
dc.creatorBuchuk, David
dc.date.accessioned2018-11-21T21:22:32Z
dc.date.available2018-11-21T21:22:32Z
dc.date.createdAugust 2018
dc.date.issued2018-08
dc.date.submittedAugust 2018
dc.date.updated2018-11-21T21:22:32Z
dc.description.abstractThis dissertation consists of two essays on dynamic models in corporate finance. In the first essay, I estimate a dynamic investment model for business groups in which their pyramidal ownership structure generates an agency problem between controlling and minority shareholders. In the model, the controlling shareholder can transfer resources across group firms using intra-group loans, allowing risk sharing and reducing the need for external financing. In a sample of Chilean business groups, I perform counterfactual experiments in which I compare group-affiliated firms with equivalent non-group firms. I find that for the average business group the incremental value of the internal capital market represents roughly 1.5-1.7% of the firm equity value. Although the controlling shareholder gets a larger portion of the value gains, minority shareholders also benefit from these internal transactions. In the second essay, we estimate a structural model of investment for a firm exposed to output price risk, which can be hedged using derivatives. In our model, we endogenize the cost of debt, which is affected by the firm's risk management policies. Hedging, therefore, creates value for the company by reducing the cost of debt. Additionally, since hedging has the effect of reducing the variability of the cash flows generated by the firm, it also creates value by exploiting convex costs and concave payoffs in our model. Using a dataset with detailed information on the derivative positions of upstream oil and gas firms during 1996-2013, we estimate the model via the simulated method of moments (SMM). We estimate that the value of hedging is 7.67% of assets. Roughly, half of this value is a result of the effect of hedging on the cost of debt, the rest of the value being related with other non-linearities in the model. Comparative statics exercises suggest that the variables that most affect hedging policies are the volatility of internal cash flows, capital adjustment costs, costs of equity financing, and the risk premium/discount in the derivatives market. Consequently, the value created by hedging is also most sensitive to these variables, and especially to the cost of equity financing and the risk premium/discount in the derivatives market.
dc.description.departmentFinance, Department of
dc.format.digitalOriginborn digital
dc.format.mimetypeapplication/pdf
dc.identifier.urihttp://hdl.handle.net/10657/3360
dc.language.isoeng
dc.rightsThe author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s).
dc.subjectDynamic Corporate Finance
dc.subjectBusiness Groups
dc.subjectRisk management
dc.titleEssays in Dynamic Corporate Finance
dc.type.dcmiText
dc.type.genreThesis
thesis.degree.collegeC. T. Bauer College of Business
thesis.degree.departmentFinance, Department of
thesis.degree.disciplineBusiness Administration
thesis.degree.grantorUniversity of Houston
thesis.degree.levelDoctoral
thesis.degree.nameDoctor of Philosophy

Files

Original bundle

Now showing 1 - 1 of 1
Thumbnail Image
Name:
BUCHUK-DISSERTATION-2018.pdf
Size:
446.07 KB
Format:
Adobe Portable Document Format
Download

License bundle

Now showing 1 - 2 of 2
No Thumbnail Available
Name:
PROQUEST_LICENSE.txt
Size:
4.43 KB
Format:
Plain Text
Description:
Download
No Thumbnail Available
Name:
LICENSE.txt
Size:
1.81 KB
Format:
Plain Text
Description:
Download

Collections

Published ETD Collection