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Essays in empirical corporate finance Wang, Jin


This dissertation is a collection of three essays that explore topics in empirical corporate finance. The first essay studies the quality of proxy advisors' recommendations. Using a comprehensive sample of say-on-pay recommendations from the two largest proxy advisors over the period 2012 – 2019, I document that proxy advisors fail to filter out industry-level returns that are presumably beyond the control of management in evaluating a CEO’s pay package. This finding contradicts the predictions of standard agency theory that CEOs should be evaluated on their relative performance in the presence of common shocks. I use adjustment for industry performance as the quality measure of recommendations. I find a decrease in quality (1) when proxy advisors are busy, and (2) when proxy statements and pay contracts are complex. My analysis suggests that proxy advisors’ capacity constraints are likely explanations for the limited applications of relative performance evaluations in their recommendations. The second essay, coauthored with Jan Bena, develops a novel measure of disagreement in voice between active and passive mutual funds using their proxy votes that captures shareholder conflicts in public firms. We show that the disagreement in voice between passive and active funds is associated with a decrease in firm value and suggest that the firm value loss is due to conflicting incentives between the two groups. The third essay, coauthored with Jan Bena and Guangli Lu, studies the impact of national culture on within-firm pay inequality using a unique administrative dataset covering closely-held immigrant-owned firms in Canada from 2001-2017. We find that within-firm pay inequality varies significantly with a firm owner’s country of origin. Firms owned by immigrants from more individualistic countries have higher pay inequality. Using a difference-in-differences analysis, we find a significant increase in within-firm pay inequality after the firm is taken over by immigrant owners from countries with higher within-firm-pay-inequality or more individualistic cultures.

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