Author : Hui Wang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (119 download)
Book Synopsis Essays on Household and Corporate Finance by : Hui Wang
Download or read book Essays on Household and Corporate Finance written by Hui Wang and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation has two essays which lie at the intersection of household finance and corporate finance. The topics include household leverage and human capital investment, and cross-holding and corporate borrowing. The essays hope to provide empirical analysis to better understand the economic decision made by both individuals and firms in practice. The first essay is “Household Financial Leverage and Human Capital Investment”. In this study, I find that household leverage has a hump-shaped effect on individual’s incentive to invest in human capital. Using the comprehensive information from the National Longitudinal Survey of Youth, I identify human capital investment decision based on whether an individual requests and participates in on-career skill acquisition training, and estimate household leverage based on the detailed debt and asset information. To strengthen causal inferences, I construct an instrumental variable based on changes in household’s mortgage burden relative to home value resulting from plausibly exogenous housing price fluctuations across regions and over time. Overall, this study highlights the effect of household leverage on human capital investment, which provides valuable implications for decisions of both individuals and macro policymakers. The second essay is “Networking Behind the Scenes: Institutional Cross-industry Holdings and Information Frictions in Corporate Loans”, joint with Jie He, Lantian Liang, and Han Xia. In this research, we study the role played by institutional investors in shaping firms’ cost of borrowing through affecting borrowers’ information friction in corporate loan market. We find that borrowers linked to banks other than the existing lenders through cross-holdings enjoy significantly lower loan spreads. This finding is mostly driven by institutions transmitting information between portfolio firms and banks, which mitigates information frictions and thereby reduces firms’ borrowing costs. For identification, we adopt a difference-in-differences method based on the quasi-natural experiment of financial institution mergers. Our evidence highlights an important effect of institutions’ cross-industry holdings on the corporate loan market.