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The first essay examines the extent to which individual demographic characteristics influence capital structure decisions. I estimate the joint effects of traditional capital structure determinants and manager age, gender, education, business experience, sophistication, and wealth on the capital structure of single-owner corporations. By calculating the marginal contribution of personal risk tolerance, I demonstrate that owner preference contributes meaningfully to the explained variation in capital structure decisions. The second essay examines the fate of firms that report negative book-value equity between 1970 and 2007. For the full sample of COMPUSTAT from 1970 to 2007, negative-equity firms account for 9.66% of the 246,869 firm-year observations. Upon initially reporting negative equity, these firms remain active in COMPUSTAT, on average, for an additional 6.18 years. I examine the taxonomy of these potentially insolvent firms and determine the transition probabilities. My study also includes an examination into the steady increase in percentage of firms reporting negative equity over the time period, with less than 1% of the firms reporting negative equity in 1970 to more than 10% in 2007, yet the longevity of these firms does not diminish. I analyze sources of funds for these firms to show that distressed firms have a remarkable ability to generate substantial funds through short-term and long-term debt and through the issuance of stock, thereby postponing or avoiding costly bankruptcy.
Capital Structure, Personal Risk Characteristics, Negative Equity Firms
Date of Defense
June 23, 2009.
A Dissertation submitted to the Department of Finance in partial fulfillment of the requirements for the degree of Doctor of Philosophy.
Includes bibliographical references.
James S. Ang, Professor Directing Dissertation; Thomas W. Zuehlke, Outside Committee Member; Rebel A. Cole, Committee Member; Bruce Haslem, Committee Member; Yingmei Cheng, Committee Member.
Florida State University
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