ESSAYS IN FINANCIAL ECONOMICS, POLITICAL ECONOMY, AND BUSINESS

Abstract

This dissertation explores the multifaceted impacts of legislation and policy on economic outcomes and business dynamics. Chapter 1 focuses on the U.S. government's response to the COVID-19 pandemic through the CARES Act and foreclosure moratorium. Utilizing a Fama-French five-factor asset pricing model event study hybrid approach, this chapter investigates whether these legislative measures distorted the efficient returns of the housing finance sector. The findings reveal that the CARES Act led to short-term abnormal stock returns in the housing sector, with mortgage-related firm stocks experiencing negative shocks. In contrast, real estate and residential construction firms saw modest positive returns. This analysis underscores the sensitivity of mortgage firm stock returns to legislative interventions and the resilience observed in other housing-related sectors. Building on the theme of legislative impacts, Chapter 2 examines the unintended economic consequences of Proposition 47, which is aimed at decarceration of non-violent criminals in California. The research in Chapter 2 uses synthetic control design, difference-in-difference, and synthetic difference-in-difference models to determine whether Proposition 47 inadvertently caused higher prices for California consumers through increased property crime. The research finds evidence that Proposition 47 increased prices for nondurable and commodity goods when looking at the city level but found that at the state level, the effects are less clear. These results highlight the trade-offs voters face when implementing criminal justice reforms and the broader economic implications of such policies. In Chapter 3, the dissertation focuses on family business dynamics, specifically examining succession readiness. This chapter presents a novel survey-based succession readiness index developed from responses from 310 family-owned businesses. Through path analysis, logit, and probit modeling, the study investigates the relationship between succession readiness and various factors, including the characteristics of potential successors, firm attributes, business owner profiles, and family communication levels. The results indicate that among the measured characteristics in the survey, communication, firm size, firm governance, and perceived importance of the firm owner play the largest roles in determining business succession readiness. This dissertation aims to understand the complex interplay between legislation, economic outcomes, and business dynamics to offer tangible and valuable insights for policymakers and business practitioners.