Essays in institutional investment and corporate capital structure

This dissertation contains three essays in institutional investment and corporate capital structure.;Analyzing institutional ownership of SEO firms around the offering date, Gibson et al. (2004) find that issuers with the largest increase in institutional investment perform better than those with the greatest decrease. The first essay confirms this stock picking ability during the pre-Regulation FD period but find that it is no longer present after the Regulation FD effective date. This result is consistent with the notion that the previously documented stock-selection capabilities of institutional investors are at least partly due to private information obtained from uneven information disclosure at SEO issuance. After losing their informational advantage in the post-Regulation FD period, institutional investors give less consideration to prudence and liquidity proxies but prefer stocks with higher momentum and stock price volatility.;In the second essay, we use two dynamic partial-adjustment capital structure models to estimate the impact of several macroeconomic factors on the speed of capital structure adjustment toward target leverage. We find strong evidence consistent with a prediction from the Hackbarth et al.'s (2006) framework that firms tend to adjust their leverage towards targets faster in good macroeconomic states. We also find support for the pecking order and market timing theories. Our results are robust to firm size, deviations from target, leverage definitions, and possible boundary issues.;Essay three investigates the capital structure choice in asset downsizing firms between 1985 and 2006. I find that downsizing firms tend to significantly reduce their target leverage after downsizing. In addition, downsizing firms are more likely to adjust faster toward their target leverage after downsizing compared to expanding firms due to the sunk adjustment costs incurred. Also, I find that downsizing firms' debt versus equity issue and repurchase choices are not significantly affected by the macroeconomic conditions. In other words, downsizing firms with significant change in target leverage, are more eager to bring their leverage back towards their target leverage after downsizing regardless the macroeconomic conditions. Comparatively, expanding firms' debt versus equity issue and repurchase choices are more subject to the overall macroeconomic conditions.