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Title: Essays in empirical corporate finance
Author: Zhang, Bobo
ISNI:       0000 0004 8497 8160
Awarding Body: University of Warwick
Current Institution: University of Warwick
Date of Award: 2018
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This thesis consists of three essays in empirical corporate finance. In the first chapter co-authored with April Klein and Tao Li, we document that a number of sell-side healthcare analysts gain access to information outside the purview of management through Freedom of Information Act requests to the Food and Drug Administration for records on factory inspections, complaints, and drug and medical device applications. Using a difference-in-differences methodology, we find that buy (sell) recommendations and upgrades (downgrades) earn higher (lower) stock returns over the year following the receipt of FDA records. We also examine the type of information revealed in FDA factory inspection reports, and find that analysts are less likely to downgrade and are less pessimistic in their recommendations than the consensus recommendation when the information contained in the FDA report is not particularly severe. Our findings are consistent with a subset of analysts utilizing non-public information channels independent of management to gain value-relevant information about their covered firms. The second chapter of the thesis studies corporate political transparency through the lens of shareholder engagements. We analyse factors explaining activist shareholders' target decisions and likelihood of successful engagements. Using hand-collected public announcements of engagement outcomes, we find that stock market reacts positively to successful engagements and negatively to a subset of unsuccessful engagements in politically active companies. Similar reactions are also found using institutional investors' holding data. Investors' aversion to hidden risk and disciplinary effect of increased transparency could potentially explain the market reactions. Collectively, the results suggest that stock market investors value political transparency, especially in politically active companies. In the third chapter co-authored with Zhou Zhang, we study the impact of corporate fraud revelation on linked firms along the supply chain. We show empirically that the revelation of corporate misconduct results in negative short-term market reactions for the stocks of suppliers and customers. The determinants of suppliers' and customers' abnormal returns are analysed to further uncover the main channel of shock propagation. In contrast to previous literature on production shocks, we do not find evidence in support of operation channel. Our results provide support for the reputation channel. We also find the negative shock is amplified by low-quality information environment. Overall, our research suggests that the revelation of corporate fraud imposes negative externalities on upstream and downstream firms, and enhanced corporate information environment and social capital accumulation could help alleviate them.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: HD Industries. Land use. Labor ; HF Commerce ; HG Finance ; HV Social pathology. Social and public welfare