Essays on international capital markets and financial institutions

Chapter 1 examines the equity premium puzzle by looking at stock market data from 39 countries. For each of these countries average total return as well as the equity premium is estimated for the past twenty to thirty years. Large differences across countries in stock market performance and equity premiums are observed, and a variety of regression specifications and explanatory variables are used to explain these large international differences. It is found that the equity premium is a persistent phenomenon, primarily of wealthier, stable countries.; Chapter 2 analyzes the explanatory power of bankruptcy laws on a firm's capital structure decisions. First, OECD data from the 15 countries and a wider sample of 40 countries is looked at. It is found that an index of creditor's protection is a highly significant variable in explaining international differences in capital structure, and that stronger creditor protection in a country leads to lower levels of corporate debt. Second, a theoretical model is presented that shows that increased creditor protection will lead to lower levels of debt if corporate policymakers are risk averse.; Chapter 3 examines the determinants of corporate diversification and vertical integration using international data. First, international differences in diversification and vertical integration are looked at in a sample of 40 countries. Next, studies are done on U.S. and German firms. It is found that ownership concentration has a positive correlation with diversification, which suggests that risk reduction is a motivation for diversification. Evidence from this study suggests that vertical integration may increase firm risk, although this result is not as strong.