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This cumulative dissertation extends the literature strand on dynamic trade-off models in corporate finance. While Kane et al. (1984) and Fischer et al. (1989) have been probably first in developing dynamic trade-off models incorporating the effects of debt financing, it was Leland (1994) that really started the contingent claims revolution in corporate finance (Strebulaev and Whited, 2011, p. 25). Over the last 25 years, a whole strand of literature extended Leland's basic model to shed light on various financial decisions. To just provide some examples: Goldstein, Ju, and Leland (2001) based their model on a stochastic EBIT-process and allowed for an option to increase debt in order to understand the dynamic adjustment of capital structures. Strebulaev (2007) included external shocks into his capital structure models and gave indications on how capital structure tests shall be conducted. The contributions achieved in the essays of this dissertation focus on (i) more realistic conditions of default, (ii) an improved understanding of observed debt maturities and (iii) capital structures, (iv) the risk of applying the Equity IRR in financial decision making, as well as (v) the optimal choice between project financing and corporate financing.
The private equity industry has experienced a decade marked by substantial growth. However, as the investment landscape for capital providers has become more complex, the leadership team of private equity firms plays a more crucial role in navigating significant challenges. Focused on two themes, this dissertation explores the background of top management teams (TMTs) in private equity firms, its correlation with fund performance, and the backgrounds of deal lead partners and their risk assessment of leveraged buyout (LBO) investments. The first essay investigates TMT diversity, emphasizing its multi-dimensional connection with fund performance. The study differentiates between socio-demographic and occupational diversity, uncovering various effects on fund outcomes. The second essay constructs a diversity index based on a comprehensive methodology to maximize the correlation between TMT diversity and private equity fund performance. The third essay explores the risk profiles of private equity partners in LBO investment decisions, establishing a link between socio-demographic backgrounds and distinct risk assessment archetypes. This dissertation contributes to the literature in the intersection of private equity and TMT, providing insights for scholars and practitioners alike.
Exploring takeover dynamics, this dissertation uncovers CEO influence in deal negotiations, revealing a quad-ratic relationship between target CEO age and offer success. It examines Fairness Opinions' role in corporate control, emphasizing their impact on management recommendations and takeover success, particularly with independent assessors. The study outlines how signaling in corporate transactions can be both beneficial and potentially manipulative, depending on the alignment of incentives and the availability of information.