Three Essays on Corporate Finance and Intermediation

This dissertation consists of three distinct but related essays on corporate finance and financial intermediation. In the first essay, I examine whether and how corporate strategic alliances affect bank loan financing costs of firms. The second essay investigates the diversity of CEO social networks and its impacts on the value creation of U.S. corporations. In the third essay, I take advantage of the dynamic nature of institutional reforms in transition economies as a natural experiment and explore the causal effects of those reforms on bank risk taking behavior.;Modern business world exhibits a strong dependency on networks of relationships. For example, many firms choose to grow by forming strategic alliances with others. Such business partnerships can be seen as relational assets, blurring firms' boundaries and providing them with the access to a broader network of resources. In the first essay of my dissertation, I examine how strategic alliances activities affect firms' bank loan financing. I construct several measures to capture firms' alliance activities. The key finding is that borrowing firms with active alliance involvement experience lower cost of bank loans. The beneficial effects are stronger for financially unconstrained firms and firms with high G-index and intensive monitoring from institutional investors. I relate the characteristics of alliance agreements to cost of bank borrowing, and report evidence supporting market power hypothesis and organizational flexibility hypothesis. I also find that allying with a prestigious partner (e.g., S&P 1500 firms) can provide certification effect and benefit the borrowers with reduced loan cost. In addition, firms positioning in the central of the alliance network enjoys lower cost of bank loans. Lastly, I document that firms engaging in alliance activities expand their debt capacity and are less likely to use collaterals and covenants in their bank loan contracts.;The second essay of my dissertation focuses on the diversity of CEO social networks and investigates its impacts on the value creation of U.S. corporations. Specifically, I ask the question: is it value-added to shareholders' wealth if a CEO has accesses to a more heterogeneous group of people, who have different demographic attributes, intellectual backgrounds, occupational experiences, and international experiences? I construct four measures of heterogeneity based on demographic attributes, intellectual backgrounds, professional experience, and geographical exposures xiii of individuals in the CEO social network. The key findings suggest that CEO social network heterogeneity leads to higher Tobin's Q of firms. Moreover, greater CEO social network heterogeneity also leads to more innovation, more foreign sale growth, higher investment sensitivity to Tobin's Q, and better M&A performance. Overall, our results indicate that CEO social network heterogeneity is an aspect of CEO social capital and soft skills that deserve the attention of shareholders.;The third essay of my dissertation is concerned about how institutional reforms affect bank risk with regards to banking liberalization, creditor rights, and corporate governance restructuring. I take advantage of the dynamic nature of institutional reforms in Eastern European transition economies as a natural experiment, and explore the causal effects of these reforms on bank risk. Using a difference-in-difference approach, I show that banks' financial stability increases substantially after these countries reform their legal institutions, liberalize banking, and restructure corporate governance. I also investigate whether different reforms substitute for or complement one other in influencing bank risk, and whether they affect foreign banks and domestic banks differently. Findings suggest that the effects of legal and governance reforms on bank risk may critically depend on the progress of banking reforms. I split the sample into foreign and domestic banks and find that the enhancement of financial stability is more pronounced for domestic banks. Finally, a further examination of alternative risk measures reveals that the increases in financial stability among banks mainly come from the reduction of asset risk. Banks tend to have lower ROA volatility and fewer nonperforming loans after reforming the institutional environment.