Essays in corporate finance

This dissertation analyzes the implications of corporate governance for corporate payout and investment decisions and contributes new evidence on the effects of monitoring and incentive distortions on value-relevant firm decisions.; The first essay examines dynamic dividend behavior. In the absence of strong corporate governance, dividends can limit inefficient managerial investment. Weakly governed managers face more shareholder pressure to sustain the dividend commitment (and expand it when the cash flow increases). I find that weakly governed managers make fewer dividend cuts and engage in more dividend smoothing. They are more likely to raise dividends through regular small increases. Weak governance has a positive effect on dividend changes, mainly in response to large cash flow increases. Total payout adjustments made by weakly governed managers support the dividend commitment. Commitment to debt is a partial substitute for persistent dividends.; The second essay focuses on pre-commitment in payout policy design. Firms use pre-commitment to dividends to mitigate agency conflicts due to poor governance. In this case a stand-alone repurchase policy is not sufficient and firms use dividend pre commitment as part of payout to mitigate weak monitoring. Weak corporate governance is associated with a greater emphasis on commitment in the choice and structure of payout. Firms with weak corporate governance also pay higher dividends, especially in high free cash flow cases. Managers faced with a high takeover threat are more likely to repurchase and tend to repurchase more. Strong internal governance (board, blockholders) allows less noisy monitoring of managerial actions and is associated with fewer cash distributions of any type.; The third essay examines governance and comovement in investment decisions across firms. Comovement is explained through managerial acquisition of private information about investment opportunities. Managers can undertake privately costly information acquisition effort or rely on publicly available information. Weak corporate governance allows managers to shirk information acquisition and results in higher comovement in investment. Weak property rights protection reduces returns on information acquisition and similarly increases comovement. Consistent with the view of comovement as an investment distortion, countries with more correlated firm level investments exhibit lower productivity growth.; JEL classification: G30, G31, G34, G35; Keywords. dynamic dividend behavior, smoothing, payout, corporate governance, managerial alignment, comovement, investment.