Essays on corporate finance

My dissertation is composed of three corporate finance studies, documenting the effects of firm policies with deep regulatory implications. In particular, I examine corporate actions taken in contexts of distress, such as defaults on syndicated bank loans, or taken in contexts of very asymmetrical information, such as private equity investment and corporate diversification. In syndicated loans, violations of financial covenants lead to the transfer of firm control rights from shareholders to creditors. I find that that firms increase disinvestment following covenant violations, both through asset sales and spin-off equity deals. Divesting firms can anticipate their exit from a default status, through one-off adjustments of their accounting variables. In diversified firms, multiple business centres exist in different divisions. We show that the addition of dedicated financial divisions to nonfinancial conglomerates is shown to have a positive impact in the efficiency of capital allocation within firms, by playing the role of redistributor and common provider of external financing. In private equity, managers and investors are bound by pre-set compensation contracts and governance rules, since the fund’s inception. I study the relationship between compensation, investment strategies and performance in this particular setting, exploring distinct rules for bonus payments