Essays in corporate governance and control

The first essay of this dissertation examines the effectiveness of the proxy fight in containing the agency problems of excessive corporate cash holding. While the takeover market is often suggested as appropriate for this role, recent work shows that this is not the case. This paper focuses on the takeover-deterrence effects of corporate liquidity and suggests the proxy contest as an effective alternative control mechanism. I find that proxy fight targets hold 57% more cash than comparable firms not targeted, and that the probability of a contest is significantly increasing in excess cash holdings. Proxy fight announcement return also is positively related to excess cash. Following a contest, executive turnover and special cash distributions to shareholders increase while cash holdings revert to normal levels. These results suggest that the breakdown in internal control indicated by excessive liquidity is mitigated by shareholders acting via a proxy fight to refocus management on value maximization or replace the incumbent team.; The second essay investigates how corporate governance differs in firms with significant labor equity stakes. Labor has a large contractual claim on a firm's cash flow. Labor equity ownership gives employees both a fractional stake in the firm's residual cash flows and a voice in corporate governance. This paper shows that, relative to otherwise similar firms, labor-controlled publicly-traded firms invest less, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. Thus, it appears that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, thereby pushing corporate policies away from, rather than towards, shareholder value maximization.; The third essay studies the relationship between governance structure and the return to the shareholders of a bidding firm in an acquisition. Prior work documents a significant relationship between bidder return and observed bid characteristics. Since these characteristics are strategic choices made by the bidder's board, this paper relates returns to the acquirer's corporate governance structure. I find that individual governance variables do not distinguish poor from good acquirers in univariate tests, but document a significant association between the bidder's return and dimensions of corporate governance in multiple regression analysis. These results illustrate the importance of a coordinated approach to governance improvement as emphasized by Agrawal and Knoeber (1996).