Empirical Essays in Finance

Empirical methods in the finance literature seek to identify the true effects of economic forces. In this dissertation I utilize a variety of econometric techniques to understand the role of liquidity for firms and capital markets. In the first essay, I use an instrumental variables approach to identify how financing flexibility in the equity channel impacts firms\u27 acquisition behavior. In the second essay, I employ a difference-in-differences technique, among others, to address how the fragmentation of U.S. equity markets in the last twenty-five years has impacted the market quality and investor participation of the assets. Finally, in the third essay I use option prices to gauge beliefs and disaster-risk associated with bad news and its differential impact on foreign exchange rates. Overall, these essays highlight the economics around liquidity through a variety of empirical techniques