Three essays on financial markets

Resumen

THREE ESSAYS ON FINANCIAL MARKETS Innovation is the main driver of growth and the wealth of nations. As emphasized by Porter (1992, p. 65), \[t]o compete e ectively in international markets, a nation's busi- nesses must continuously innovate and upgrade their competitive advantages. Innovation and upgrading come from sustained investment in physical as well as intangible assets." Given the importance of innovation for competitiveness, it is a priority to understand those factors that determine incentives to innovate at the rm level. There has been much debate on the role of nancial markets in promoting innovation. While developed capital markets can improve the eciency of long-term resource allocation through their monitoring and disciplining mechanisms, the need to meet quarterly or annual nancial objectives gives rise to adverse externalities that may impair rms' incentives to innovate (Holmstrom, 1989; Porter, 1992).1 In this paper, we focus on one cornerstone of public equity markets, namely nancial derivatives. Speci cally, we study whether the volume of equity options written on the underlying asset encourages or impedes rm innovation. Since the beginning of the new century, the total equity options volume traded on U.S. exchanges has grown exponentially, from 676 million contracts in 2000 to over 3,727 million contracts in 2015.2 Unlike stock market listings, where rms apply, options listings are exogenous to rm decisions; they are made within exchanges. These exchanges are self-regulating institutions that are members of the Options Clearing Organization (OCC) which operates under the jurisdiction of the Securities and Exchange Commission (SEC) (for exchange-listed options). Because the SEC plays an important role in determining the eligibility criteria for securities in options trading, this topic is of particular interest to policy makers.