PhD Oral Exam - Ashrafee Takdir Hossain, Business Administration

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.

Abstract

This dissertation examines how institutional and macro-financial conditions shape corporate financial policy across countries. Through two related essays, it studies how firms adjust cash holdings and leverage in response to external constraints, with particular emphasis on labor-market regulation and systemic financial stress. Together, the essays show that corporate decisions are influenced not only by firm-specific characteristics but also by broader institutional and economic environments.

The first study investigates the effect of employment protection legislation on firms across 19 countries using the Employment Protection Legislation Indicator (EPLI) from the OECD. I find that higher employment protection enforced by the government is associated with lower cash holdings. This negative association is stronger among smaller firms and financially solvent firms. The results also show that this negative association is stronger in countries with higher levels of education and stronger antitrust laws. The negative association is stronger in countries with high negative reciprocity and weaker in countries with high positive reciprocity. My results for the financial crisis indicate that this negative association became stronger after the global recession. I also find that stronger EPL is associated with lower dividend payouts and lower cash flow from operations.

The second study tests whether systemic stress affects firms’ debt policies in Europe. Using firm-level data matched with the European Central Bank’s Composite Indicator of Systemic Stress (CISS) across 17 European countries, I find that higher systemic stress is associated with higher leverage, with increases observed in both long-term and short-term debt ratios. The effect is stronger for financially unconstrained firms (larger and more profitable), suggesting that firms with better credit access substitute toward debt when stress raises the relative cost of equity. Overall, systemic stress is an important determinant of corporate debt policies in Europe.

Collectively, these essays contribute to the international corporate finance literature by providing new evidence on how labor-market institutions and macro-financial conditions affect firms’ liquidity management and debt policies. The dissertation highlights the importance of country-level forces in explaining cross-sectional variation in corporate financial behavior across international settings.