Essays on the influential role of insiders in publicly traded corporations

This thesis examines the role of insiders in publicly traded corporations in three different dimensions. The first and second chapters provide tax-based tests for the hypothesis that large shareholders influence firms' payout decisions examining dividend and repurchase decisions, respectively. The third chapter analyzes the consequences for firm performance of naming as CEO an individual who is a member of the founding family of a corporation.; The first two chapters of this dissertation apply the insights of agency models to analyze the effect of taxes on firms' payout decisions. Chapter I investigates whether firm's dividend decisions are determined by the preferences of its large shareholders. Exogenous variation from changing personal income tax rates is used to analyze dividend payments of firms whose large shareholders were affected by these reforms (individuals), to a control group of firms whose large shareholders were not. The evidence shows that dividend payouts increased in the years when dividend income was less tax-disadvantaged relative to capital gains, and decreased as this tendency was reverted, but only for firms whose large shareholders were affected by these tax reforms.; Chapter II follows the empirical methodology of chapter I to study whether share repurchases respond to the tax preferences of the large shareholders of the corporation using the 1997 Tax Relief Act as a natural experiment. For individuals, the 1997 Tax Relief Act reduced the maximum capital gains tax rates from 28 to 20 percent. I analyze the response of share repurchases of firms where the largest equity holders are individuals, using as a control group firms with institutional owners, who were not affected by this tax reform. Therefore, the response of share repurchases to large shareholders tax preferences is estimated using a differences-in-differences methodology.; The third chapter examines an alternative way in which insiders may affect the decisions of publicly traded firms. When the founder CEO of a corporation retires, she is typically influential in naming a successor. Often her influence results in the appointment of her offspring, whose skills at running the firm may be in doubt. This common practice may be particularly questionable in the case of publicly traded corporations since the interests of the founding family and those of dispersed shareholders' are not always aligned. This paper investigates whether these concerns are justified by looking at a sample of 162 CEO successions, where the departing CEO of a US publicly traded firm was related to the founding family of the corporation. (Abstract shortened by UMI.)...