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Title: Essays on incentives for agents
Author: Kanoria, Swati
ISNI:       0000 0004 7425 6308
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2018
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This thesis consists of three essays on how corporations and banks incentivize their CEOs and bankers to make optimal decisions under different settings. The first two essays are empirical with a focus on CEOs and corporate governance of firms that are targeted by activist hedge funds. The third essay builds a principal{agent model for a bank and its bankers in an asymmetric information setting. The first essay is co{authored with Jana Fidrmuc. We document the effect of hedge fund activism on the corporate governance of target firms via the specificc channel of CEO compensation. We find that target CEOs receive higher stock and total compensation, as compared to their peers, prior to an activist's entry. The entry of hedge fund activists results in a decline in target CEO pay to levels prevalent at matched rms. This decrease is not because target CEOs were extracting rents before activism. We show that the entry of hedge fund activists also results in a decline in the pay{for{performance sensitivity of CEO stock awards and total pay at target rms. These findings indicate that incentive compensation and monitoring by activist hedge funds act as substitutes in motivating CEOs to improve firms value. In the second essay, I analyze the role of a firm’s internal CEO-specificc corporate governance mechanisms in in influencing the decision of activist hedge funds to target that company. I find that activist hedge funds prefer to select firms that have good CEO governance mechanisms in place, prior to being targeted. My results show that prior to activists' entry, target firms CEOs receive more equity{based incentives rather than cash{based pay. Target firms do not have near{retirement CEOs who are more di cult to discipline. Activism target firms have fairly independent boards, which is at a level similar to peer rms. CEO pay at target firms before activism is also sensitive to firm performance. The third essay investigates the remuneration required by bankers to truthfully reveal the risk pro le of their asset classes, under information asymmetry, when bankers are more informed than a bank. In an adverse selection canonical model with two discrete banker types, High risk and Low risk, I find that the bank can achieve a positive separation of banker types without leaving any information rent for the banker. When moral hazard is present, and the banker has a choice to exert e ort to shift the distribution of returns, the bank leaves an information rent for the High risk banker.
Supervisor: Not available Sponsor: Warwick Business School
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HG Finance