Three Essays on Corporate Information Environment, Corporate Social Performance, and Corporate Financial Outcomes
Date of Award
Campus Access Dissertation
Doctor of Philosophy (PhD)
The three related essays study how firms’ information environment and firms’ corporate social performance influence corporate financial outcomes. Specifically, the first essay examines how managers use financial reporting, especially earnings numbers, to manipulate investor attention and obtain instant positive market abnormal returns. Using a large sample of U.S. firms over the period 2003-2015, I find that discretionary accruals are significantly higher for record-high EPS quarters, suggesting that managers intentionally manipulate earnings upward to create record EPS. Such earnings management is significantly higher for less visible firms which have a stronger desire for market attention. Also, such earnings management is monitored and mitigated by non-transient institutional investors. Further evidence shows that investors are indeed more sensitive to high record EPS, indicating that managers’ earnings management for record EPS is effective in attracting investor attention.
The second essay investigates whether corporate social responsibility (CSR) is associated with investors’ trading behavior before corporate announcements. Evidence shows that the degree of delayed trading volume before scheduled corporate announcements is lower for firms with better CSR performance. In addition, this effect is more pronounced for “bad news” announcements than for “good news” announcements. Further, these results are robust to the endogeneity concern and the propensity score matching technique for better CSR performance. There seems to be no significant impact of CSR performance on trading volume before unscheduled corporate announcements. The findings indicate that CSR reduces adverse selection costs of trading before scheduled announcements, which is consistent with the stakeholder view of CSR.
The third essay studies market’s reaction to corporate social performance in the Chinese context. By extracting corporate social responsibility (CSR) information from the Chinese IPO prospectuses, we design textual information indices to measure the issuers’ corporate social performance (CSP) and corporate environmental performance (CEP) and assess the market reaction. Evidence shows that CSP disclosure is significantly related to the post-market performance.
Liu, Rongbing, "Three Essays on Corporate Information Environment, Corporate Social Performance, and Corporate Financial Outcomes" (2019). Graduate Doctoral Dissertations. 493.
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