Dissertations & Theseshttp://hdl.handle.net/10106/248192024-03-29T15:59:33Z2024-03-29T15:59:33ZInvestor Sentiment and Debt Contractinghttp://hdl.handle.net/10106/317682023-11-09T22:41:48Z2023-08-02T00:00:00ZInvestor Sentiment and Debt Contracting
**Please note that the full text is embargoed until 08/01/2024** This study examines the impact of investor sentiment on loan spread and financial covenants in debt contracts. Periods of high investor sentiment generally result in pressure on loan spreads due to the ability to issue equity at lower cost. Thus, I conjecture that managers of borrowing firms as well as lenders may trade-off lower spreads against higher or more restrictive covenants during such periods. Therefore, high investor sentiment has two related effects on debt covenants: (i) it encourages higher and more restrictive covenants by lenders at contract inception and, consequently, (ii) it ensures a higher ex-ante probability of eventual covenant violations. Consistent with the conjectures, I find that investor sentiment is positively associated with the intensity and restrictiveness of financial covenants and negatively associated with spreads. Specifically, high investor sentiment periods are associated with higher covenants (performance covenants, capital covenants and covenants intensity) and lower spreads. Further analysis indicates that this relationship is more pronounced for financially constrained firms and for firms that exhibit a lower degree of timely loss recognition in accounting earnings. Additionally, I find that investor sentiment is positively associated with the ex-ante likelihood of covenant violations. Collectively, these findings highlight the importance of the role played by investor sentiment in debt contracting.
2023-08-02T00:00:00ZTOP MANAGEMENT TEAM FUNCTIONAL DIVERSITY AND FIRM PERFORMANCE: A MEDIATION ANALYSIShttp://hdl.handle.net/10106/317192023-11-09T22:51:49Z2023-08-04T00:00:00ZTOP MANAGEMENT TEAM FUNCTIONAL DIVERSITY AND FIRM PERFORMANCE: A MEDIATION ANALYSIS
In my dissertation, I study whether the top management team (TMT) between-member and within-member functional diversities affect firm performance. Between-member functional diversity, known as Dominant Functional Diversity (DFD), refers to the heterogeneity of functional experts on a TMT, and within-member functional diversity, known as Intrapersonal Functional Diversity (IFD), refers to the aggregate functional breadth of TMT members. My analysis indicates that IFD is positively and significantly associated with firm performance. The relationship between DFD and firm performance is also positive but not statistically significant. In the second analysis, I perform a mediation analysis to explore plausible mechanisms through which TMT IFD affects firm performance. I identify managerial ability, firm efficiency, and investment efficiency as potential mediators. Using the bootstrapping methodology, the results support the mediating role of managerial ability in the positive association between IFD and firm performance; however, I cannot find the evidence that firm efficiency or investment efficiency mediates the relation between IFD and firm performance. Finally, I perform a moderating analysis to examine whether the relation between functional diversity and firm performance is moderated by the financial distress, defined as the firm-years with the annual abnormal returns in the bottom 5% of the sample. The results fail to show that the relation between IFD/DFD and firm performance is moderated by the financial distress.
2023-08-04T00:00:00ZEarnings management strategy of pension plan changing firmshttp://hdl.handle.net/10106/309372023-01-10T14:12:51Z2022-08-16T00:00:00ZEarnings management strategy of pension plan changing firms
This study investigates the earnings management strategy of defined benefit pension plan changing firms. I provide the evidence that managers engage in cash conservation activities and real earnings management in response to the changes in funding status and pension income through the manipulation of pension assumptions before and after pension freezing. These results suggest that earnings management through pension assumptions affects the normal operations of the firm through real activities during the defined benefit plan pension freezing. I also provide evidence that pension termination firms exhibit a lower level of discretionary accruals after the termination, suggesting the downsizing of a pension plan serves as a tool for earnings management. These findings provide evidence that firms alter earnings management strategy and engage in cash saving activities in response to the changes in pension assumptions during the pension freezing and the changes in the pension structure during the pension termination.
2022-08-16T00:00:00ZThe timing of insider trading and management forecast credibilityhttp://hdl.handle.net/10106/304082022-11-14T19:29:16Z2022-05-16T00:00:00ZThe timing of insider trading and management forecast credibility
In this paper, I study how past insider trading patterns affect management forecast credibility. I first hypothesize and find that, due to litigation concerns, executives are unlikely to use a “pump-and-dump” strategy to maximize trading profits. Instead, they issue more accurate and conservative management earnings forecasts before insider sales. I then document that insider sales after forecasts have signaling content. Specifically, firms where a higher fraction of insider sales occurs shortly after the forecast enjoy higher forecast credibility in the future. This effect is more pronounced when firms are difficult to value and less pronounced when firms show traces of upward earnings management. Additional analysis suggests that my result is not driven by rule 10b5-1 trades or the existence of voluntary insider trading restriction policies, and that managers intending to sell after their forecasts are motivated to have strong internal control systems to assure forecast accuracy. Finally, I show that a history of issuing upwardly biased forecasts shortly before insider sales tarnishes future forecast credibility.
2022-05-16T00:00:00Z