Document Type


Date of Degree

Summer 2012

Degree Name

PhD (Doctor of Philosophy)

Degree In

Business Administration

First Advisor

Matthew T. Billett

Second Advisor

Jon A. Garfinkel


This thesis comprises of three chapters. The first essay is coauthored with Professor Matthew T. Billett and is titled ‘Asymmetric Information and Open Market Share Repurchases.' The second essay is join work with Professor Matthew T. Billett and Professor Jon A. Garfinkel and is titled ‘The Effect of Asymmetric Information on Product Market Outcomes'. The third essay is sole-authored and is titled ‘Crash Risk and Firms' Cash Policies'.

Chapter one reveals cross sectional differences in undervaluation by combining open market share repurchase (OMR) announcements with asymmetric information. We find that opaque firms experience significantly larger abnormal returns than transparent firms upon an OMR. Following Ikenberry, Lakonishok an Vermaelen (1995), we strategy the sample by book-to-market, which may relate to undervaluation, and examine the effect of firm opacity within book-to-market groupings. High book-to-market opaque firms experience average three-day market-adjusted returns of 5.05% compared to 1.86% for high book-to-market transparent firms. We also document significantly positive long run post-announcement returns for opaque firms, but not for transparent firms. Our results suggest undervaluation motive for OMRs is concentrated in opaque firms, and that undervaluation due to asymmetric information attenuates at the announcement of OMRs.

Chapter two explores how asymmetric information in financial markets affects outcomes in product markets. Given endogeneity concerns, we study firms in industries that experience deregulatory shocks. Post-deregulation, firms with greater opacity about their financial condition lose market share to their industry rivals. We further show that opaque firms have lower capital raising activity after deregulation. We conclude that asymmetric information in financial markets is an important determinant of product market outcomes.

Chapter three examines the effect of crash risk on firms' cash policies. We find high crash risk firms which experience large negative stock returns over the fiscal year or show large conditional negative return skewness tend to hold more cash than low crash risk firms. The phenomena are more pronounced for financial constraint firms and small firms. In addition, we show that the marginal value of cash for high crash risk firms is lower compared to low crash risk firms. Based on our findings, we argue that crash risk has been taken into account when firms make their cash decisions.


x, 141 pages


Includes bibliographical references (pages 135-141).


Copyright 2012 Miaomiao Yu