Essays on finance, investment, and money

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Date
2019-01-01
Authors
Kim, Jae Hyoung
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Peter Orazem
James Brown
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Economics
Abstract

Three chapters in this dissertation revolve around the areas of empirical corporate finance and behavioral finance, with particular focuses on firms’ R&D financing, the manager side of behavioral finance, and the effect of network formations on media of exchange.

Chapter 2 examines the effects of the financial side of the firm on labor. These effects have not been studied extensively. Using the system Generalized Method of Moments, fixed effects, and IV models, this chapter shows that balance sheet liquidity (cash holdings) can help maintain stable employment in response to demand shocks.

Chapter 3 implements human-subject experiments. It shows how contrast effects from psychology studies influence investment and financing decisions. This chapter illustrates that individuals exposed to a positive stimulus amplify risk-seeking in investment decisions compared to individuals exposed to a negative stimulus. However, exposure to positive or negative stimuli does not affect financing decisions. It is likely that financing decisions require a high cognitive load, so they are less affected by emotions.

Chapter 4 examines how different types of trade networks influence the emergence of one or more types of money. Many new types of monetary networks have emerged such as cryptocurrency networks. However, the underlying reason for the emergence of new money types is not well understood. Using an agent-based computer model, this chapter shows that the emergence of multiple goods as media of exchange depends on the network structure governing trade between agents.

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Thu Aug 01 00:00:00 UTC 2019