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Thesis defences

PhD Oral Exam - Pedram Fardnia, Finance

Essays in corporate governance

Monday, August 24, 2020 (all day)

This event is free


School of Graduate Studies


Daniela Ferrer



When studying for a doctoral degree (PhD), candidates submit a thesis that provides a critical review of the current state of knowledge of the thesis subject as well as the student’s own contributions to the subject. The distinguishing criterion of doctoral graduate research is a significant and original contribution to knowledge.

Once accepted, the candidate presents the thesis orally. This oral exam is open to the public.


Corporate governance is a heavily researched area in the finance literature, with previous studies exploring a multitude of variables that describe a firm’s board structure, management, compensation, etc., and how they affect corporate decisions, firm performance, and various other aspects of corporate life. Corporate governance has important implications for nearly all business entities in the world. Yet, despite its popularity as a research topic, many research questions within the field still remain unaddressed.

In the first part of my thesis, I explore the relation between corporate governance practices and shareholder litigation. Specifically, employing a sample of 1,613 sued firms and an equally sized sample of propensity-score matched non-sued firms, I explore how different aspects of a firm’s corporate governance structure and governance practices (e.g., the firm’s management compensation policy, its board structure, its ownership structure, and its CEO characteristics) affect the likelihood of litigation against a firm, as well as the cumulative abnormal returns around said litigation. At the same time, I examine whether firms that face higher litigation risk adjust their governance practices to pre-empt being sued. Finally, I explore whether firms improve any shortcomings in their governance structure and/or governance practices post-litigation. We find evidence that variables that describe a firm’s corporate governance, the compensation of its CEO, as well as the CEO’s characteristics have a significant influence on the firm’s litigation risk. Specifically, a firm’s likelihood of being sued depends on board variables, including its board size, board independence, the size of the nominating committee, nominating committee independence, and CEO/chairman duality. In addition, firms whose CEOs have longer tenure or serve in a dual CEO/chairman role are more likely to be sued. Our results further show that, after a lawsuit, sued firms tend to improve their corporate governance and the proportion of their independent directors. In addition, we document that the accounting performance of sued firms decreases two years after a given lawsuit; however, if sued firms improve their governance, their accounting performance improves as well. In summary, our results provide important insights into the role of ex-ante active monitoring (via the board of directors) versus ex-post passive monitoring (via shareholder litigation), and how litigation as a passive monitoring device can cause firms to improve their active monitoring.

In another research, I choose the aviation industry and examine the potential effects corporate governance policies may have on the safety record of that industry. In the past three decades, there were over 12,000 recorded fatalities from plane crashes just in North America. Pilot errors and mechanical failures are responsible for 75% of all accidents. Arguably, both are to some extent preventable because they relate to the way an airline company is managed and on specific decisions its board and managers make (e.g., in terms of pilot hiring and training, equipment purchases, maintenance schedules, internal reporting, etc.). My research answers questions such as: Is an airline’s safety performance influenced by the characteristics of its CEO, board, and board members? Does monitoring effectiveness affect an airline’s safety record? What rules and regulations at the macro-level help improve safety in the aviation industry in a cross-country context? My findings reveal that airline safety is significantly affected by a series of firm level characteristics that describe an airline’s governance as well as its financial well-being. In addition, I find that airline safety is affected by a variety of country-level factors that characterize the legal, institutional, and economic environment of a given country, as well as its air transport infrastructure. The results of this study have important policy implications for both the airline industry and regulators. To allocate resources more efficiently, regulators may find it beneficial to focus their supervision on airlines with poor governance practices as well as airlines that are in financial distress.

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