This paper investigates the dynamic interactions of firms' financial behaviours using a five-variable structural vector autoregression (SVAR) framework. We provide empirical evidence that firms' financial behaviours are jointly determined. We demonstrate that a single-equation analysis on one financial behaviour generates biased estimates. We find that firms deviate from the desired level of each financial characteristic to absorb shocks to the other financial characteristics. Following such deviations, the characteristics revert in subsequent periods. Among these inter-related financial behaviours, equity decisions are the most independent, followed by dividend target, investment, and leverage target. Although firms prioritize financial behaviours differently, it appears that there is neither one financial behaviour that firms use only to absorb shocks nor one that never responds to the others.

An open market share buyback is not a firm commitment, and there is limited evidence on whether firms repurchase the intended shares. Unlike US studies, we use data from unique UK regulatory and disclosure environment that allows to accurately measure the share buyback completion rates. We show that information disclosure and CEO overconfidence are significant determinants of the share buyback completion rate. In addition, we find that large and widely held firms that conduct subsequent buyback programs and have a past buyback completion reputation exhibit higher completion rates. Finally, we assess whether other CEO characteristics affect buyback completion rates and find that firms with senior CEOs who hold external directorships and have a longer tenure as CEO are more likely to complete the buyback programs. In sum, our results suggest there is a clear relationship between information disclosure, CEO overconfidence, and buyback completion rates.

In this paper, we analyze whether regulation reduced risk during the credit crisis and the sovereign debt crisis for a cross section of global banks. In this regard, we examine distance to default (Laeven and Levine, 2008), systemic risk (Acharya et al., 2010), idiosyncratic risk, and systematic risk. We employ World Bank survey data on regulations to test our conjectures. We find that regulatory restrictions, official supervisory power, capital stringency, along with private monitoring can explain bank risk in both crises. Additionally, we find that deposit insurance schemes enhance moral hazard, as this encouraged banks to take on more risk and perform poorly during the sovereign debt crisis. Finally, official supervision and private monitoring explains the returns during both crisis periods.