Access to adequate liquidity to finance future investments is an essential element of financial management. The two main questions that this dissertation attempts to answer are (i) what is the net valuation effect of LoC? and (ii) if LoC create value, what are the sources of this value? To answer these questions, I constructed a sample of 85,232 firm-years spanning from 1993 to 2016, with credit line data obtained from Capital IQ and Bloomberg. I investigated the valuation effects of LoC with a methodology extensively used in the analysis of the valuation implications of cash. I used this methodology because cash and LoC are two alternatives to manage liquidity and estimated the changes in shareholders' value associated with changes in existing LoC undrawn balances and on new LoC agreements. The results from this analysis demonstrates a positive association between increases in LoC capacity and shareholder's value. These findings are also obtained in univariate and event study analyses. The results also suggest that LoC create more value for firms that are rich in cash, indicating the LoC and cash are complementary liquidity management tools. I then focused on the sources of the value created by credit lines. I examined whether information asymmetry plays a role in LoC valuation by analyzing the association between firm value and LoC for firms with high- and low-information asymmetric. I also studied whether LoCs reduce agency problems by comparing firm value and LoC capacity in both poorly and well-governed firms. Furthermore, I examined whether firms benefit from an increase in financial flexibility provided by access to credit lines. I found results consistent with LoC being more valuable for firms with higher levels of informational asymmetries. The analysis also suggests that LoCs with longer maturity create more value than those with shorter maturity. Surprisingly, I find limited support for the hypothesis that shareholders place a higher value on LoCs in increasing financial flexibility. Moreover, I found no support for the role of credit lines in reducing agency problems.

Greenwashing has long been considered a viable strategy in the literature and academic research has explored its drivers from an institutional viewpoint. This paper extends the literature by considering greenwashing from a financial management viewpoint. It is found that when firm stock volatility is low, when the weighted average cost of capital is high, when firm pricing power is strong, and when information asymmetry is high, that the financial incentives for greenwashing are strong. The potential returns to greenwashing are weakly related to the level of systemic risk of the firm. The simulation results of the model indicate that in the current era that the returns to greenwashing are quite limited without a lot of information asymmetry. The results indicate that in previous eras, there were more opportunities for greenwashing. Overall, the results suggest that for low-and average-beta firms that organizational-level drivers and individual-level psychological drivers are more important in driving greenwashing decisions. The results also show why stock-based incentives do not support corporate social responsibility.

Economic theory and empirical research suggests product market competition can result in both positive and negative capital market effects. Specifically, research suggests competition reduces agency costs, but also reduces profitability. I examine the relation between product market competition and firm value in an international setting, focusing on how the relation varies with firm- and country-specific characteristics. I document lower values for firms in more competitive industries. However, the negative relation between competition and firm value is less pronounced for firms with higher firm-level liquidation risk, stronger country-level investor protection mechanisms, and higher firm-level transparency. These findings are consistent with an agency cost benefit resulting from product market competition. / Ph. D.

Using a dataset of 7757 firms in Brazil, China, India, and Russia from 2009 to 2014, this article examines the effect of political risk variables on financial flexibility and the effects of financial flexibility on future firm value, capital investment, cash holdings and the probability of default while controlling for firm-level effects and political variables. Effective representation of the majority is found to be associated with a higher level of financial flexibility. In terms of the effects of financial flexibility on firm value, results that are much stronger than previously reported are found. However, unlike previous work, the current research does not find that increased financial flexibility leads to increased capital expenditures. It is found that financially flexible firms in these countries lower their probability of default on average by about 0.6 %. It is also found that giving greater voice to the majority and greater adherence to the rule of law adds to the value of firms.

Yes / This paper examines a new channel through which dividend policy can affect firm value. We find that firms that pay dividends exhibit lower systematic liquidity risk than those that do not. We also report a significant negative relationship between dividend payment and systematic liquidity risk. The liquidity improvement associated with dividend payments translates into an economically meaningful reduction in the cost of equity capital. Our results are robust to endogeneity concerns, to alternative measures of liquidity risk and dividend payouts, and to alternative model specifications. Further analysis suggests that the reduction in liquidity risk associated with dividend payouts is more pronounced for weakly governed firms and firms with opaque informational environment. Finally, we find that the recent financial crisis led to a greater increase in systematic liquidity risk for firms with no or low dividend payouts. Overall, our study implies that dividend policy can be used by corporate managers to shape liquidity risk and mitigate the adverse impact of economic downturns on the value of their firms.

The study examines the level of quantity and quality of Key Performance Indicators (KPIs) reporting for a sample of FTSE 350 UK listed companies over the period (2006-2010). Furthermore, it identifies the determinants of KPIs reporting and investigates its impact upon firm value. Based upon the guidance of the best practice recommended by the Accounting Standard Board (2006), the study develops a measure of disclosure quality by considering the main qualitative attributes of information which, arguably, makes KPIs information more useful to stakeholders. The distinction between disclosure quantity and quality in the study enables the researcher to get greater insights into the drivers and implications of KPIs reporting quantity and quality. The study finds a variation between UK firms in the number of KPIs disclosed with a notable low level of reporting quality, especially for non-financial KPIs. It also finds that corporate governance mechanisms play an important role in improving KPIs reporting. In particular, it shows that directors’ compensations affect the quantity and quality of KPIs disclosure. Furthermore, the study provides evidence that quantity and quality of KPIs disclosure are not derived by the same factors, and both have different impacts on firm value. Whereas, the study finds a negative association between the numbers of KPIs disclosed and firm value, a non-significant relationship is reported between KPIs reporting quality and firm valuation. Overall, this study provides evidence that disclosure quantity is not a good proxy for disclosure quality.

Bakgrund och problemdiskussion: Företag motiverar vanligtvis centraliserad finansiering med att det leder till värdeökande effekter, något som forskningsvärlden endast teoretiskt berört vilket ger indikationer på att en centraliserad finansiering kan utgöra en värdeökande strategi. Det föreligger därmed ett intresse att undersöka detta empiriskt. Avsaknaden av ett mått för centraliseringsgraden av finansiering medför att framställande av detta mått dock måste genomföras före teorin om värdeökning kan testas empiriskt. Syfte: Studien syftar till att 1) ta fram ett mått för centraliseringsgraden av finansiering, 2) säkerställa validiteten i detta mått och 3) genom detta mått testa centraliseringsgradens effekt på företagsvärde. Metod: Första syftet uppfylls genom en explorativ studie där närliggande teorier använts tillsammans med observationer av verkligheten. Andra syftet uppfylls genom en mindre statistisk undersökning utifrån årsredovisningar samt en enkätundersökning riktad till experter inom området. Tredje syftet uppnås genom en kvantitativ studie där formulerade hypoteser testas i en statistisk undersökning på 152 svenska börsnoterade bolag.  Resultat och slutsatser: Studien säkerställer ett approximativt mått för centraliseringsgraden av finansiering. Måttets samband med företagsvärde kan dock inte säkerställas. Centraliseringsgraden har däremot ett samband med företagsvärde under vissa förhållanden vilket innebär att ett samband inte heller kan uteslutas. Vidare finner studien empiriskt stöd för Tradeoff Theory, däremot kan ingen förklarande modell för kapitalstrukturen säkerställas och därmed inte heller centraliseringsgradens betydelse för kapitalstrukturen. Slutligen har studien även påbörjat en förklarande modell till centraliseringsgraden av finansiering i och med att geografisk spridning visar sig ha positiv påverkan på centraliseringsgraden. / Background: Firms using centralized financing function usually motivates it by it’s value adding property, something today’s research only theoretically touched which indicates that centralized financing can be a value adding strategy. Therefore it exists an interest for an empirical examination. The lack of a measurement for the degree of centralized financing implies that this measurement have to carried out before the theoretical value adding strategy can be empirical tested. Purpose: The study’s purposes is 1) bring forward a measurement for the degree of centralized financing, 2) secure the measurement’s validity and 3) through this measurement test it’s value adding effect to firm value. Method: The first purpose is achieved through an explorative research design where theories close to the subject together with observations of reality were applied. The second purpose is achieved through a smaller statistical study based on financial reports in conjunction with a survey aimed towards experts within the knowledge area. The third purpose is achieved through testing hypotheses in a statistical study on 152 Swedish listed companies. Results and conclusions: The study validates an approximate measure of the degree of centralized financing. The measurement’s connection to firm value can not be established. Although, the degree of centralization has a connection to firm value given certain circumstances which implies that the connection cannot be ruled out either. Further, the study finds empirical support for Tradeoff Theory, however, there are no empirical support for the explanatory model for the capital structure and, by extension, neither for the degree of centralization’s significance on capital structure. Finally, the study has also begun an explanatory model for the degree of centralization of financing since geographical spread has a significant positive effect on the degree of centralization.

This study aims to demonstrate how different country and industry-level variables affect the value-creating abilities of CSR initiatives. It contributes to the growing body of literature about CSR as it directly compares the moderating effects of the quality of country-level institutions with the moderating effects of the respective industry sector. The study amongst 3,670 firms in a sample period from 2006-2014 shows that CSR initiatives have a superior value-creating ability in environments with weak capital markets and country governance standards. Firms in controversial industry sectors have a superior ability to create value through CSR because they display a higher potential for reputational gains through CSR due to the nature of their business. The results of the study suggest a supremacy of country-level determinants over industry-level determinants of the CSR-firm value relationship.

The aim of the study is to investigate how the quality of sustainability reports affects financial performance and firm value in the Swedish manufacturing industry.

Durante as décadas de 50 e 60, muitas empresas norte-americanas iniciaram um processo intenso de diversificação. Este processo atingiu seu ponto máximo com mais uma onda de fusões do final da década de 60 e que culminou com o surgimento de conglomerados corporativos gigantes. Nos últimos 15 anos, a tendência tem se revertido como mostra os recentes estudos de COMMENT e JARREL (1994), BERGER e OFEK (1995) e LIEBESKIND e OPLER (1993), que documentam o retorno à especialização. Este movimento em direção à especialização aparentemente resultou da visão de que diversificação de empresas não-correlacionadas diminui o valor da empresa. Argumentos teóricos sugerem que a diversificação tem tanto efeito de aumentar o valor da empresa como de diminuir. Os benefícios potenciais de se operar diferentes linhas de negócio como se fossem uma única empresa incluem maior eficiência operacional, menor possibilidade de perder projetos com valor presente líquido positivo, maior capacidade de alavancagem financeira e menores impostos. Os custos potenciais da diversificação incluem o uso de recursos em projetos que diminuem o valor da empresa, subsídios entre unidades de negócios que permitem unidades com baixo desempenho se aproveitarem dos recursos gerados por unidades com alto desempenho e conflito de interesse entre os executivos das unidades de negócio e da corporação. Não há predições claras sobre o efeito global da diversificação no valor da empresa. Foram utilizados dados de unidades de negócio para estimar o efeito da diversificação no valor das empresas no setor de telecomunicações da economia norte-americana. Comparou-se a soma das unidades de negócio diversificadas com valores imputados pelo modelo com os seus valores reais dentro das corporações a que pertencem. As empresas diversificadas tiveram seus valores em média, durante o período de 1990-99, entre 0,2% e 6,4% acima dos valores imputados pelo modelo. O trabalho está dividido da seguinte forma: o capítulo 1 apresenta o problema de pesquisa, mostrando sua origem e importância; o capítulo 2 revisa a fundamentação teórica e detalha alguns resultados de estudos anteriores sobre os efeitos da diversificação; capítulo 3 descreve a amostra utilizada e o modelo de pesquisa aplicado; o capítulo 4 mostra os efeitos da diversificação nas empresas do setor de telecomunicações do mercado norte-americano entre os anos de 1990 e 1999; o capítulo 5 apresenta as considerações finais com sugestões de novos estudos sobre este assunto. / During the 1950s and ´60s many US corporations undertook massive diversification programs. This process reached its climax with the merger wave of the late 1960s and the accompanying rise to prominence of huge conglomerate firms. In the last 15 years the trends has reversed, with studies by COMMENT and JARREL (1994), BERGER and OFEK (1995) and LIEBESK and OPLER (1993) documenting a return to specialization. This push toward focus apparently resulted from the view that unrelated diversification decreases firm value. Theoretical arguments suggest that diversification has both value-enhancing and value-reducing effects. The potential benefits of operating different lines of business within one firm include greater operating efficiency, less incentive to forego positive net present value projects, greater debt capacity, and lower taxes. The potential costs of diversification include the use of increased discretionary resources to undertake value-decreasing investments, cross subsidies that allow poor segments to drain resources from better-performing segments, and misalignment of incentives between central and divisional managers. There is no clear prediction about the overall value effect of diversification. In this study, it was used segment-level data to estimate the valuation effect of diversification on US Telecom companies. It was compared the sum of imputed stand-alone values of the segments of diversified companies to the actual values of those companies. It was documented that diversified firms have values that average, during 1990-99, 0,3% to 6,4% above the sum of the imputed values of their segments. Chapter 1 describes the main goal of this study and its genesis. Chapter 2 reviews the related literature and details the predicting resulting from prior theoretical work. Chapter 3 describes the sample and explains the empirical approach. Chapter 4 assesses the overall value effect of diversification using imputed segment values and a comparison of profitability between diversified and single-segment firms. Finally, Chapter 5 describes the final considerations about the diversification’s effect on firm value.