Graduation Year


Document Type




Degree Granting Department

Business Administration

Major Professor

Ninon Sutton, Ph.D.

Committee Member

Scott Besley, Ph.D.

Committee Member

Christos Pantzalis, Ph.D.

Committee Member

Jianping Qi, Ph.D.


Balance Sheet Liquidity, Growth Opportunities, Financial Slack, Financial Constraints, Performance Decline, Turnaround


This dissertation includes two related chapters that analyze financial condition of firms. In the first chapter, I examine the relationship between the firms' level of cash holdings and governance. The findings show that higher levels of cash holdings are significantly related to strong governance. The results also show that firms with strong governance hold asymmetrically higher levels of cash than firms with weak governance when they have high growth opportunities. Furthermore, I also test the impact of financial constraint status of the firm on the level of cash holdings for both good and poorly governed firms separately. The results suggest that strong governance firms hold higher levels of cash to use as financial slack in order to avoid financial distress. In the second essay I examine if a firm's success in leaving distress is explained by firm characteristics and manager decisions. I proxy the managers' decisions by measuring changes in operating, investing, and financing choice variables. Timely decisions with regard to product refinement, proxied by increased investment in research and development and reduction in capital expenditures, increase the probability of successful turnaround. Further the results show that increased financing through additional sale of equity, acquisitions and sale of assets do not help a firm exit financial distress.