Document Type


Degree Name

Doctor of Philosophy (PhD)



Program Name/Specialization

Financial Economics


Lazaridis School of Business and Economics

First Advisor

Dr. Si Li

Advisor Role


Second Advisor

Dr. Ben Amoako-Adu

Advisor Role

Member of dissertation committee

Third Advisor

Dr. Phelim Boyle

Advisor Role

Member of dissertation committee


The prevalence of financial market frictions is far from uncommon. Between 1970 and 2011, Laeven & Valencia (2012) identify 147 banking crises, along with 218 episodes of currency crises, and 66 episodes of sovereign debt default. Thus, understanding a firm’s behavior in the presence of financial crisis is an important issue for future financial research. My dissertation explores corporate payout and liquidity policy either during a financial market crisis, or in anticipation of a financial market crisis.

In the first essay, “Capital Market Friction and Corporate Payout Policy”, I focus on the role of supply of capital on corporate payout policy. I examine whether an extreme shock to, or a marginal change in, global credit conditions has any impact on a firm’s choice of payouts. I find that during global credit shocks, firms that rely more heavily on credit markets to finance payouts (experiment group) are more likely to reduce their payouts, mainly through repurchase mechanisms. Some of the findings in this essay challenge the traditional wisdom of payout policies. For example, I find that larger firms, that are presumably more resourceful at finding credit in times of need, are comparatively more likely to reduce their payouts in response to credit shocks than smaller firms. This reveals a unique aspect of a firm behavior during financial market frictions that is dissimilar to their behavior in normal times.

In the second essay, “Investment Bank Exposure to Hedge Funds and Financial Contagion”, I examine the systemic relation between two of the most important financial sectors, namely, investment banks and hedge funds. I find that the two sectors show signs of financial contagion and the direction of contagion is most likely from a hedge fund to its prime brokerage, and not the other way around. The results of the analyses are of particular interest to policy makers looking to regulate the prime brokerage business of investment banks in relation to systemically important hedge funds.

In the third essay, “Bank Strategic Choice of Asset Liquidity”, I explore a bank’s optimal choice of holding liquid assets in the presence of financial market frictions. I show that the higher level of pre-crisis liquid assets statistically and economically improves bank competitiveness during financial crises. The private motive of holding liquid assets prior crises, however, may be inconsistent with any liquidity regulations, e.g., Basel III NSFR, aiming to increase the aggregate level of liquidity in normal times; That is, the chance of making profits during crises periods lessens when all banks maintain liquid balance sheet in normal times.

Overall, the three essays in the dissertation contribute to the growing literature on financial policies that do not consider the supply of capital as completely elastic.

Convocation Year


Convocation Season