Essays on Financial Intermediaries




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This dissertation consists of two essays that study the issues related to financial intermediaries. In the first essay, I examine the effects of institutional common ownership on the use of peer benchmarking for CEO pay. By compensating managers based on their co-owned peers' performance as well as their own performance, blockholders can incentivize managers to avoid head-to-head competition with their co-owned peers while maximizing group performance. I find that CEOs' total compensation is positively sensitive to the stock performance of industry peers that share common blockholders. Furthermore, I document that firms sharing common blockholders tend to have more differentiated products, greater joint market share, and greater geographical overlap in business operations.

In the second essay, my coauthors and I examine the impact of the disclosure regulation under Regulation AB, which is the disclosure rule that requires all material risk factors applicable to the transaction or to the nature of the security to be disclosed. Specifically, we look at the responses of financial intermediaries to the regulatory changes on disclosure in the asset-back securities market. We find an immediate jump in the percentage of deals with origination stakes just below the disclosure threshold following the implementation of Regulation AB. We also provide evidence that MBS underwriters deliberately keep lower quality loans below the disclosure threshold in order to evade disclosure.



Financial institutions, Chief executive officers, Executives—Salaries, etc., Disclosure in accounting, Disclosure of information—Law and legislation


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