Empirical essays in corporate finance: implications of market participants and corporate social responsibility

Zhou, Haoying (2024). Empirical essays in corporate finance: implications of market participants and corporate social responsibility. University of Birmingham. Ph.D.

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Abstract

In the first empirical investigation discussed in Part II, we study the impact of corporate culture on corporate social responsibility (CSR). We employ text analysis on companies’ annual 10-K to measure corporate-level culture quantitatively based on the competing values framework (CVF). We find that collaborative culture promotes corporate CSR by circumventing environmental and social controversies and seizing environmental and social opportunities, while creative and competitive cultures diminish CSR by discounting environmental and social opportunities and aggravating their controversies, respectively. We also examine the moderating role of blockholders, documenting empirical evidence that blockholders substitute the culture-CSR relationship flagging the impact of corporate culture on CSR. Our results are robust after accounting for endogeneity using the instrumental variable (IV) approach, entropy balancing method, matched sample, alternative statistics approaches, and alternative measures of cultural dimensions, blockholders, and CSR.
In the second empirical investigation discussed in Part III, this study examines whether ESG blockholders drive the issuance of corporate green bonds, whose proceeds are primarily used to finance environmentally friendly activities. We show that ESG blockholders exert a positive influence on the issuance of green bonds. The issuance, in turn, benefits the existing shareholders as it lowers the cost of external financing over the following years. Moreover, we find that ESG blockholders effectively alter the positive relationship between green bond issuance and the cost of debt financing in the long term, compensating for the inadequacy of the long-term effects of green bond issuance on issuers’ financing costs in the debt market. It suggests that ESG blockholders are value-enhancing for green bond issuers. Furthermore, we indicate that after a temporary impact of the climate policy shock, ESG blockholders give higher emphasis to green action by driving green bond issuance to avoid exposure to more environmental risks. Overall, our findings imply that large financial institutions paying attention to environmental and social issues can play an important role in developing green bond markets.
In the third empirical investigation discussed in Part IV, we examine the impact of analyst activity on investor demand for bonds. Using comprehensive data on orderbook size in the primary market of corporate bonds, we provide robust evidence that higher analyst coverage and higher forecast accuracy have a positive impact on investor demand, whereas forecast dispersion has a negative impact. We also find that the impact is more pronounced if the bond has a less informative issuance procedure, such as non-green bonds, and if bond issuers have higher information asymmetry and low ESG performance. This evidence suggests that bond investors’ demands overcome the information asymmetry associated with bond issuers using analysts’ activity. Overall, our results are consistent with the bright side view and imply that analyst activity is a critical determinant of investor demand for corporate bonds.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

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