Essays on empirical corporate finance and corporate governance

This dissertation contains three essays on empirical corporate finance and corporate governance.;The first chapter, titled "The Costs of Large Shareholders: Evidence from China", tests the relation between large shareholders and firm value using a recent reform in China's equity market. The reform eliminated the discrepancy between large shareholders' voting rights and cash-flow rights. The paper finds that large shareholders expropriate less through related party transactions after the reform when the discrepancy between their voting rights and cash-flow rights prior to the reform was larger. It also finds that minority shareholders gain from the reform: firms earn higher excess returns around the reform announcements when the discrepancy was larger. Finally, it provides the evidence of efficiency gains among firms that had a larger discrepancy. The paper concludes that a large discrepancy between large shareholders' voting rights and cash-flow rights can lead to efficiency losses.;The second chapter, titled "Foreign Bank Entry and Firms' Access to Bank Credit: Evidence from China" studies the impact of foreign bank entry on domestic firms' access to bank credit using a within-country staggered geographic variation in the policy of foreign bank lending in China. The paper finds that the impact of foreign bank entry varies with firm heterogeneity: firms with higher profitability or firms less connected to the government use more long-term bank loans after foreign bank entry; whereas firms with higher value of potential collateral do not. The findings suggest that information asymmetry is important in foreign bank lending and that collateral may play a limited role in mitigating the problem of information asymmetry when creditors' rights are not well protected in a host country.;The third chapter, titled "What's Bank Reputation Worth? Evidence from Enron and WorldCom", is a joint work with Daniel Paravisini. We demonstrate empirically the role of bank monitoring reputation in financial intermediation and financial contracts. Banks actively involved the provision of credit to Enron and WorldCom reduce their supply of syndicated credit after their fraud scandals are uncovered. Consistent with a reputation loss, conditional on participating as a lead arranger in a syndicated loan, the affected banks hold higher lead shares. Additional evidence indicates that the reputational shock to lenders affects corporate financial policy and investment.