Publication Date

Spring 5-9-2023

Document Type


Degree Name

Doctor of Philosophy in International Business Administration (Ph.D.-IB)

Committee Chair

Nathaniel P. Graham

Committee Member

Jorge O. Brusa

Committee Member

George R. Clarke

Committee Member

Anwen Yin


This dissertation focuses on three new issues in corporate finance, each aiming at different aspects of a firm's behavior. First, I propose a novel way to classify domestic manufacturing firms based on their level of financial constraint. Using the operating cash flow ratio as my new measure, I find that the behavior of constrained and unconstrained firms differ significantly, unlike existing constraint measures from the literature. My results indicate that constrained firms cannot engage in equity recycling, have a higher sensitivity to cash flow, use the proceeds from the sales of their fixed assets in R&D, and cannot change leverage quickly. Overall, my findings support using a cash flow-based constraint measure as it performs better at identifying constrained firms that indeed behave as if they are financially constrained. My second essay discusses factors that drive a firm's financing choices and aims to evaluate competing capital structure theories. Six factors are identified as a reliable basis for explaining leverage changes from a comprehensive range of farm-specific and macroeconomic factors used in prior studies. The reliable impact of market-to book, Firm Size, and expected inflation factors observed in market-based leverage is not present when studying book leverage. However, median industry leverage, tangibility, and profitability are statistically significant. The pecking order theory offers an intuitive explanation for the observation that more profitable firms tend to have lower leverage. The trade-off theory can account for many factors, including industry leverage, firm size, tangibility, and market-to-book. In my third essay, I investigate whether firms behave differently based on the type of performance goal set for their CEOs. I find correlations between CEO performance-based grants and the utilization of accrual and real activities-based earnings management by examining a comprehensive dataset of CEO performance goals. I hope my findings could lead to recommendations for compensation committees and consultants to structure performance-pay contracts differently to reduce earnings management efforts.