Three theses on corporate finance

Jiang, Yucen (2023). Three theses on corporate finance. University of Birmingham. Ph.D.

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Abstract

This thesis focuses on agency problems among variety of parties in companies. We first investigate the effect of CEO inside debt on trade credit policies. CEO inside debt is perceived as a mechanism for aligning the interests of management and debt holders, reducing the exploitation of debt holders by the shareholders and for promoting more conservative corporate policies. The empirical results support our hypothesis by proving that there is a negative and significant relationship between CEO inside debt and trade credit in terms of trade payables. However, we find an insignificant effect of CEO inside debt on trade receivables. We further investigate how institutional investor ownership affects the negative relationship between CEO inside debt and trade credit. We find that, with a higher level of block holder ownership, the reduction effect of CEO inside debt on the trade payables is less pronounced. We also find weak evidence that, for firms with higher information asymmetry, there is a more pronounced negative relationship between CEO inside debt holdings and provision, and the adoption of trade credit. Our findings support the risk-reduction effect of CEO inside debt and confirm the implications of CEO inside debt for financing decisions. Furthermore, using a comprehensive sample set of firms from 48 countries over the period from 2003 to 2019, we investigate the impact of greenwashing on analyst forecast accuracy. After controlling for firm and country specific factors, as well as industry fixed effects and country fixed effects, we employ a panel data regression model and find a significantly negative relationship between greenwashing and analyst forecast errors. This finding is robust to alternative measures of analyst forecast accuracy and endogeneity concerns. We further examine the impact of cash holdings on the relationship between greenwashing and analyst forecast errors. Our results show that, for firms with a higher level of cash holdings, the negative association between greenwashing and analyst forecast errors is less pronounced. We also find that countries with cultures that are characterized by higher levels of masculinity exhibit a weaker relationship between greenwashing and analyst forecast errors, while we find no evidence of any significant effects of three other national culture factors: Power Distance, Individualism and Uncertainty Avoidance. The findings in this paper suggest an amplifying effect of greenwashing on agency problems associated with analyst forecasts. We further examine how business greenwashing practises are associated with the provision and use of trade credit. Using firm-year observations of U.S. listed firms, we find that both provision and adoption of trade credit by firms are negatively associated with corporate greenwashing activity. We also examine the channel effect for the relationship between these two and our result show that greenwashing activity influences firms’ trade credit through the channel of financial constraints rather than social capital. Our results further indicate that the association between trade payables and greenwashing is less pronounced for firms with higher institutional ownership. Additionally, we discover that the strength of the link between trade receivables and greenwashing decreases when the associated information asymmetry is higher. We finally provide supportive evidence that both greenwashing and trade credit play a role to relieve firms’ financial constraints and works in a substitution with each other.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):