Browsing by Author "Tepe, Mete"

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    Is short-term debt a substitute for or complementary to good governance?
    Anginer, Deniz; Demirguc-Kunt, Asli; Simsir, Serif Aziz; Tepe, Mete (Elsevier, 2022-03)
    Short-term debt can reduce potential agency conflicts between managers and shareholders by exposing managers to more frequent monitoring by the credit market. Using an international dataset, we examine whether internal monitoring can substitute for external monitoring through the use of short-term debt. We find that the relationship between debt maturity and governance depends on the institutional environment in a given country. In common-law countries and in countries with stronger investor protection rights, governance and short-term debt act as substitutes. The extent of creditor rights, state-level governance quality, cultural characteristics, and economic development levels of countries also play a role in explaining the relationship between governance and debt maturity. Copyright (C)& nbsp;2021, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.& nbsp;
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    Two Essays on Executive Compensation
    Tepe, Mete (Virginia Tech, 2017-08-15)
    This dissertation consists of two essays, both co-authored with Ugur Lel. The first essay (Chapter 1) examines whether high CEO pay inequality (CPI), the share of total managerial pay captured by the CEO, is an outcome of poor corporate governance, and its implications for shareholder wealth. We exploit the 2002 NYSE and NASDAQ governance reforms that mandated firms to have majority independent boards as a quasi-exogenous source of variation in the internal governance environment of firms. Results show that CPI decreases following the passage of these exchange listing regulations, but only in firms with entrenched CEOs affected by the exchange listing regulations. Firm value also increases for these firms. These results are robust to a variety of robustness checks such as a matched sample analysis and placebo tests. Overall, our results suggest that poor governance environments are associated with high managerial pay differences and consequently lower firm valuations, supporting the view that high CEO pay inequality reflects managerial entrenchment. The second essay (Chapter 2) examines whether shareholders use executive compensation channel to align managerial horizon with their investment horizon. We utilize a newly emerged empirical measure, pay duration, to measure managerial horizon. For shareholder horizon, we use the fraction of long-term institutional ownership in the firm. Results show that there is a positive association between long-term institutional ownership and CEO pay duration, suggesting that shareholder horizon is a determining factor in compensation contracts. We address reverse causality using indexer institutions. We also establish a causal link from investor horizon to CEO pay duration using institution mergers as a source of exogenous variation in investor horizon of the firm. We extend our results to hedge fund activism and document a negative relation between hedge fund activism and pay duration, which is consistent with our argument. Overall our results suggest that shareholders structure CEO pay in a way that is consistent with their investment horizon.