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Three essays on the effect of alternative investors on corporate finance

Lim, Jongha
http://rave.ohiolink.edu/etdc/view?acc_num=osu1311002674

Abstract Details

2011, Doctor of Philosophy, Ohio State University, Business Administration.
In the past decade, alternative investors such as hedge funds, private equity firms, and other assets management firms have emerged as new leading figures in providing active ownership. These new breed of investors have a great degree of flexibility to execute multiple innovative investment strategies and trading techniques from which other traditional investors are prohibited. Such flexibility, together with strong monetary incentives, makes them well suited to playing an active role in the corporation. Accordingly, we have observed alternative investors have made significant inroads and played a central role in various aspects of corporate finance, including corporate restructuring, capital raising, and corporate governance. The emergence of new investors in the corporate scene can bring positive efficiency results in a sense that their organizational nature are fundamentally different from that of other traditional investors and therefore have a potential to provide a new way of resolving various kinds of friction in corporations. On the negative side, however, their power play might be disruptive and produce significant profits for themselves at the expense of the other stakeholders. The first evidence in this study indicates that the presence of activist hedge funds in the restructuring of distressed firms creates efficiency rents by reducing obstacles to efficient bargaining in the resolution financial distress. Distressed firms with activist hedge funds‟ involvement spend less time in distress and are more likely to survive as an iii independent reorganized company versus being sold to a strategic buyer or liquidated. The ability to restructure more efficiently seems to arise from the ability of hedge funds to provide more flexible options of restructuring and much-needed capital. The second piece of evidence, however, suggests possibilities of negative impact on borrowing firms in the context of loan contract with alternative investors who acquire significant equity stake before loan originations. Empirical evidence is consistent with the view that institutional dual holders extract rents from the „informationally captured‟ borrowers in the form of higher pricing. Overall, evidence in this study indicates the large and growing role of alternative investors in many corporate affairs, and therefore calls for further future research on this topic.
Michael Weisbach (Committee Chair)
Anil Makhija (Committee Member)
Bernadette Minton (Committee Member)
126 p.
Finance
Alternative Investment; Corporate Finance; Hedge Funds; Distressed Firms; Leveraged Loans; Dual Holdings

Recommended Citations

Citations

  • Lim, J. (2011). Three essays on the effect of alternative investors on corporate finance [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1311002674

    APA Style (7th edition)

  • Lim, Jongha. Three essays on the effect of alternative investors on corporate finance. 2011. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1311002674.

    MLA Style (8th edition)

  • Lim, Jongha. "Three essays on the effect of alternative investors on corporate finance." Doctoral dissertation, Ohio State University, 2011. http://rave.ohiolink.edu/etdc/view?acc_num=osu1311002674

    Chicago Manual of Style (17th edition)

osu1311002674
966
© 2011, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.