Corporate governance and corporate finance during crisis periods
4 March 2016
University of Antwerp, Promotiezaal Grauwzusters - Lange Sint-Annastraat 7 - 2000 Antwerp
Prof Marc Deloof
PhD defence Veronique Vermoesen - Faculty of Applied Economics
In the first two studies of this dissertation we focus on two important internal corporate governance mechanisms: the composition of the board of directors and directors’ incentive pay. We investigate how these two were related with the value of listed Belgian firms before and during the Great Depression when legal shareholder protection was weak and information asymmetry was high.
In the first study, we find that firms typically had a large board, with directors holding multiple directorships in banks and other firms and that this was positively associated with corporate value. However, during the crisis, we find that such boards become less suited. This negative crisis effect seems to be partly driven by firm risk: riskier firms had busier and larger boards and experienced a larger drop in value.
In the second study, we find that performance-related compensation for directors was already well established. The calculation of their bonus was regulated by the articles of incorporation. In practice, directors’ bonus was mainly tied to net income of the previous year. We find no evidence of shareholder expropriation via bonuses.
In the third study, we use the recent financial crisis to investigate financing constraints of private small and medium-sized enterprises in Belgium. We find a substantial variation in the maturity structure of long-term debt. Furthermore, we find that firms which, at the start of the crisis, had to repay a large part of their long-term debt, experienced a significantly larger drop in investments in 2009. This effect is driven by firms which are ex ante more likely to be financially constrained.