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Title: Essays on aggregate liquidity and corporate events
Author: Xu, F.
Awarding Body: City University London
Current Institution: City, University of London
Date of Award: 2009
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A sizeable stream of theoretical and empirical research in corporate finance reveals that corporate investment and financing activities in capital markets occur in waves through time, which are accompanied with many abnormal phenomena surrounding and after the announcement of events. Motivated by existing studies in firm-level and aggregate-level liquidity, which suggest the influence of (aggregate) liquidity on the activity and quality of corporate events, the purpose of this thesis is to investigate and understand the role of aggregate liquidity in explaining existing phenomena associated with corporate investment and financing events including mergers and acquisitions (M&A), initial public offerings (IPOs), seasoned equity offerings (SEOs), and, finally, corporate asset sales. Liquidity is an important and special asset for firms operating in imperfect capital markets. At aggregate level, corporate holdings of liquidity and the market provision of liquidity play important roles in capital markets, which inevitably affect the decision making and performance of corporate events. In this research, I investigate whether corporate investment and financing events occurring during high aggregate liquidity markets are fundamentally different from those occurring during low aggregate liquidity markets. Empirical evidences in this research show that the activity and quality of major corporate investment and financing events are substantially influenced by aggregate liquidity. Moreover, many of the market anomalies concentrate in certain aggregate liquidity conditions. For M&A, I find that there are more acquisitions in highliquidity periods, and acquirers buying during high-liquidity markets have significantly higher pre-announcement returns, but lower post-merger abnormal returns. For IPOs and SEOs, results show that there are many more public equity offerings in high-liquidity periods than in low-liquidity periods. Offering firms selling securities during high-liquidity markets have significantly higher occurrences of underpricing (discounting) and suffer larger long-run underperformance. For asset sales, highliquidity divesting firms have better performance measured by firm characteristics and post-sale returns.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HB Economic Theory