Essays on Empirical Corporate Finance
On Wednesday 3 June 2020 Loreta Rapushi will hold a trial lecture on a prescribed topic and defend her thesis for the PhD degree at NHH.
Prescribed topic for the trial lecture:
Corporate Financing Decisions
Trial lecture:
10:15 - 11:00, Zoom video conference, NHH
Title of the thesis:
Essays on Empirical Corporate Finance
Summary:
Firms that raise capital through seasoned equity offerings (SEOs) tend to over perform the market prior to the issue and underperform it after the issue. Different theories have tried to explain these patterns together with the timing of the offerings.
The first paper of this thesis brings evidence in support of the market timing theory. It shows that managers strategically inflate their reported earnings to boost share prices and mislead investors. The paper identifies a novel channel of manipulation, through non-investment long-term accruals, and examines how this channel links to the manager’s objective to boost the stock price and benefit from it. The use of a non-investment related measure of earnings manipulation makes it possible to disentangle between market timing theory and investment theory in explaining the performance of issuing firms.
In the second paper (co-authored with Michael Kisser), we focus on the equity issues whose proceeds are used to finance debt buybacks. The focus on these operations is motivated by a large literature suggesting they may be the result of creditors control rights. Such firms exhibit a high degree of financial reporting conservatism and financial covenants violation. There is no reason to suspect they can time the equity market. Still, against the expectations we show that the market timing theory explains the observed patterns.
The third paper studies how a firm’s financial condition affects its decision to undertake leverage decreasing recapitalizations (LDRs) and how the market reaction to its announcements differs across the different types of LDRs. By comparing the mid-term stock return performance for debt buyback strategy and cash hoarding strategy, I find that equity issuance to increase cash holdings is better perceived by the markets. The result is consistent with an option value of cash holdings.
Defense:
12:15, Zoom video conference, NHH
Members of the evaluation committee:
Professor Tore Leite (leader of the committee), Department of Finance, NHH
Associate Professor Danielle Zhang, Oslo Business School, Oslo Met
Professor Mattias Hamberg, University of Stavanger.
Supervisors:
Associate Professor Michael Kisser (main supervisor), Norwegian Business School BI
Associate Professor Kyeong Hun Lee, Department of Finance, NHH