Qinghai Wang

Does Corporate Headquarters Location Matter for Firm Capital Structure

This paper studies the impact of corporate headquarters location on capital structure policies. We show that firms exhibit conformity in their financing policies to those of geographically proximate firms, and that the location of corporate headquarters helps explain the cross-sectional variation of capital structure in the United States. The location effect is robust to local credit market conditions and to state laws on corporate takeover and payout restrictions. The results suggest that non-economic factors, such as local culture and social interactions among corporate executives, play a significant role in influencing corporate financial policies of firms headquartered in the same metropolitan area.

Does Geographic Dispersion Affect Firm Valuation

We find that the geographic dispersion of a corporation affects its firm valuation. Firms with subsidiaries located in different regions of the United States experience a valuation discount of 6.2% after controlling for the impact of both global and industrial diversifications. The valuation discount increases as firms expand their operations to different regions nationwide. Results show that firms with more anti-takeover provisions are more likely to be geographically diverse, and that these firms experience greater value discounts compared with their counterparts with fewer such provisions. Our overall evidence suggests that the geographic location of corporate activities is an essential component of corporate policies and has important market valuation implications.

Does Shareholder Approval Requirement of Equity Compensation Plans Matter

This paper studies the impact of the 2003 SEC Regulation requiring shareholder approval of all equity-based executive compensation plans on executive compensation policies and practices at S&P 500 firms. Following the 2003 Regulation, firms with shareholder approved equity plans in place or those with strong performance, while not those with non-approved plans or weak performance, increase their equity compensation proposal submission activity. The quality of equity compensation proposals improves in the after-regulation period, and shareholders exhibit greater scrutiny and monitoring of executive compensation through increased voting rights. We find a decline in the equity pay component while an increase in the cash component of total executive compensation after the 2003 Regulation and also provide evidence that the 2003 Regulation contributes to this change in compensation structure.

Short Selling, Agency, and Corporate Investment

We study the effects of short selling activities on corporate investment. In a model with short-term managerial incentives, we show that short sellers can cause firms to overinvestment. The overinvestment is more severe for managers with low productivity and/or with high short-term incentives. Empirically, we find that short interest is strongly and positively associated with subsequent corporate investment. The impact of short selling activities on investment is greater when a firms investment prospect is poor and/or when the sensitivity of a CEOs compensation to stock price performance is strong. Additionally, both short interest and corporate investment are negatively associated with subsequent stock returns.