Essays in empirical corporate finance
Abstract/Contents
- Abstract
- In this thesis, I study two independent but closely related topics: the impact of liquid assets on corporate investments and bank deposit funding. In the first chapter, I examine the effect of a firm's liquidity holdings on its real investments and its impact on broader outcomes. I exploit a regulation-driven supply expansion of wealth management products (WMPs) that leads to an exogenous liquidity return increase accessible to Chinese firms. WMPs are deposit alternatives issued by commercial banks outside of the regulatory purview and are the dominant form of liquidity holdings by Chinese firms. I find that in response to the regulation, firms increase their liquidity holdings and sharply reduce capital and R& D expenditures. Using exogenous variation in banks' WMP supply induced by regulation, I argue that the effect of corporate liquidity holdings on real investments is causal and not driven by changes in firms' real investment opportunities. The reduction in real investments further leads to a decrease in firm-level TFP, patent application, primary business revenue, and employment. Exploiting regional economic growth in a difference-in-difference setting that uses the same regulatory shock suggests that the growth of corporate liquidity holdings has a negative impact on local economic outcomes. Cities more exposed to the WMP supply expansion exhibit slower capital and consumption growth. My findings suggest that a firm's liquidity holding decisions have a direct impact on its real investments and broader economic activities. In the second chapter, we demonstrate the passthrough of Treasury supply to deposit funding through bank market power. We show that an increase in Treasury supply leads to a net deposit outflow. At the same time, reliance on wholesale funding decreases. The effect is heterogeneous in nature - banks in more competitive markets experience larger outflows. The explanatory power of Treasury supply is not driven by monetary policy and bank-specific investment opportunities. Our empirical findings are rationalized with a model of imperfect deposit competition. Consistent with "The Deposits Channel of Monetary Policy", the model and empirics predict the opposite effect for Fed Fund rate hikes: there is a larger response in less competitive markets. Our results also shed light on the effect of the Reverse Repurchase (RRP) Facility on monetary policy passthrough
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2020; ©2020 |
| Publication date | 2020; 2020 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Zhao, Yang |
|---|---|
| Degree supervisor | Rauh, Joshua |
| Degree supervisor | Seru, Amit |
| Thesis advisor | Rauh, Joshua |
| Thesis advisor | Seru, Amit |
| Thesis advisor | Bernstein, Shai |
| Thesis advisor | Blattner, Laura |
| Thesis advisor | Krishnamurthy, Arvind |
| Degree committee member | Bernstein, Shai |
| Degree committee member | Blattner, Laura |
| Degree committee member | Krishnamurthy, Arvind |
| Associated with | Stanford University, Graduate School of Business. |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Yang Zhao |
|---|---|
| Note | Submitted to the Graduate School of Business |
| Thesis | Thesis Ph.D. Stanford University 2020 |
| Location | electronic resource |
Access conditions
- Copyright
- © 2020 by Yang Zhao
- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
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