Ren, Helen Mengbing (2020) Three essays on disclosures and corporate finance. PhD thesis, University of Warwick.

Preview

PDF WRAP_Theses_Ren_2020.pdf - Submitted Version - Requires a PDF viewer. Download (2444Kb) | Preview

Request Changes to record.

Abstract

This thesis is composed of three essays on corporate disclosures in the context of empirical corporate finance. It explores managerial incentives for corporate disclosures and examines how manager disclosure decisions affect stock prices as well as how manager behavior and information asymmetry can be affected by a specific disclosure regulation.

Chapter 2 investigates whether and how financial constraints on firms affect the risk of their stock prices crashing. We hypothesize that financial constraints increase future stock price crash risk via both bad-news-hoarding and default-risk channels. The results confirm our conjectures and are robust to using a dynamic panel generalized method of moments (GMM) estimator and two quasi-natural experiments to control for potential endogeneity. Cross-sectional analyses reveal that the positive relation between financial constraints and future crash risk is more prominent for firms with high abnormal accruals or with weak corporate governance and less pronounced for firms that commit tax avoidance or have a high credit rating.

Chapter 3 and Chapter 4 focus on market consequences of corporate disclosures about derivative instruments and hedging activities. Derivatives are increasingly used by managers not only to hedge risks but also to pursue non-hedging activities for fulfilling opportunistic incentives. Using the mandatory adoption of a financial reporting standard (SFAS 161) on derivative disclosures, we examine whether and how derivative disclosures influence managerial opportunistic behavior. We employ insider trades and stock price crash risk to capture managerial opportunism. Applying a difference-in-differences design with hand-collected data on derivative designations, we find that, after the implementation of SFAS 161, derivative users that comply with SFAS 161 experience a significantly greater decrease in both insider trades and stock price crash risk, compared with a matched control sample of non-derivative-users. Our cross-sectional analyses reveal that SFAS 161 has greater impact on firms in the case of high information opacity, high financial risk, or high business risk. We find no evidence that, compared to the non-derivative-users, derivative users not compliant with SFAS 161 have a greater reduction in either insider trades or stock price crash risk in the post-SFAS 161 period, implying the importance of enhancing the enforcement of the regulation.

Given that the transparency of firms’ derivative disclosure improves after SFAS 161, in Chapter 4, we examine whether the enhanced derivative disclosures reduce the information asymmetry between informed and uninformed investors. Tension exists as the derivative information may not be comprehensible to relatively uninformed investors. We find that derivative users compliant with SFAS 161 experience significantly greater reduction in stock illiquidity and probability of informed trade in the post-SFAS 161 period, and such impact is more pronounced for firms with greater investor attention.

Item Type:	Thesis (PhD)
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance
Library of Congress Subject Headings (LCSH):	Disclosures in accounting, Corporations -- Finance, Stocks -- Prices, Stock price forecasting, Derivative securities
Official Date:	January 2020
Dates:	Date Event January 2020 UNSPECIFIED
Institution:	University of Warwick
Theses Department:	Warwick Business School
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	He, Guanming ; Taffler, Richard J.
Format of File:	pdf
Extent:	ix, 161 leaves
Language:	eng

Request changes or add full text files to a record

Repository staff actions (login required)

View Item

Downloads