Essays in Corporate Finance and Strategy

Essays in Corporate Finance and Strategy

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The three chapters of this dissertation examine internal capital markets, and the laboratory for the empirical tests is the motion picture industry in the United States. The first chapter shows that different divisions of the same firm have different investment-cash flow sensitivities. The key result is that the investment of core divisions is less sensitive to internal finance than that of specialty divisions, suggesting the existence of micro financial constraints originated by a strategic commitment to divisional autonomy. The second chapter studies whether financial slack has a causal effect on competitive strategy. Using detailed project-level data, I examine this question empirically after developing predictions based on economic theory. I find that firms with more financial slack tend to pursue backward vertical integration and differentiation strategies, and that the effect of financial slack is different for major and independent studios. The third chapter studies whether multidivisional structure affects investment efficiency at the project level. I find that multidivisional structure increases the investment layout for a movie, but does not affect its market performance. Thus I discover the organizational component in the efficiency of internal capital markets.Paper presented at the Wharton School, Columbia University, New- York University, Washington University in St. Louis, the Academy of Management Meetings, the CCC, and the NYU Stern Conference on Film Industries. Natividad, G. (2007).

Title:Essays in Corporate Finance and Strategy
Author: Gabriel Andres Natividad
Publisher:ProQuest - 2008

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