Download or read book Three Essays on Regulation of Firms and Investment Funds written by Sheran Deng and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: ESSAY 1: Using a Department of Justice policy change intended to increase individual responsibility of managers for corporate offenses (e.g., pollution) as a natural experiment, I find that firms with a high ex-ante probability of regulatory violations ("exposed firms") reduce investment, sales, and employment. Such reductions in reduce shareholder value. Exposed firms suffer an abnormal return of -1% around the event date on average. The negative value effects are concentrated in exposed firms with low agency costs. Exposed firms have lower cash salaries for managers after the policy intervention. Various tests support the causal effect of the policy intervention on firm behavior. These findings suggest that most regulatory offenses do not represent an agency cost on shareholders when fines are paid by shareholders. Instead, fines on shareholders allow a manager to pursue potentially harmful projects whose value to shareholders outweighs fines borne by them. ESSAY2: We present a model on regulating externalities of a firm run by a manager and owned by shareholders. In equilibrium, optimal regulation in the presence of an agency conflict can take two forms. In one regulatory strategy, a fine is imposed on the manager, and no firing takes place. Alternatively, a fine is imposed on the firm (i.e., shareholders), and the fine is lower if the manager is fired. As the agency conflict becomes more severe fining the manager becomes more attractive. Finally, we find that regulation costs are lower when the manager and shareholders are separate entities. ESSAY3: This paper studies the impact of disclosure on short selling. Using a confidential dataset on shorts on stocks traded in the Dutch stock market including both short positions large enough to trigger public disclosure and positions not large enough, we find that the quality of shorts increases discontinuously at the reporting threshold. we find strong evidence that short sellers increase security selection intensity when their short positions approach the reporting threshold. We rule out several alternative explanations These results suggest that transparency disincentivizes shorting on noisy information.