title: Three essays in corporate finance: the role of financial systemic risk, firm-level media coverage, and asset-backed securitisation
Creators: name: Jia, Zhehao
Publisher: name: University of Glasgow
Year: 2021

description: The finance system is complex that multiple components interact with each other. As one of the main players in the finance system, corporates deal with various corporate finance issues along with their life, which are particularly interesting for both managers, academics, investors, policy makers, etc. This dissertation sheds some lights on the following issues in corporate finance which are posed by the complexity of the accounting and finance area. Financial systemic risk – defined as the risk of collapse of an entire financial system vis-à-vis any one individual financial institution – is making inroads into academic research in the aftermath of the late 2000s Global Financial Crisis. In Chapter 2, we shed light on this new concept by investigating the value of various systemic financial risk measures in the corporate failure predictions of listed nonfinancial firms. Our sample includes 225,813 firm-quarter observations covering 8,604 US firms from 2000 Q1 to 2016 Q4. We find that financial systemic risk is incrementally useful in forecasting corporate failure over and above the predictions of the traditional accounting-based and market-based factors. Our results are stronger when the firm in consideration has higher equity volatility relative to financial sector volatility, smaller size relative to the market, and more debts in current liabilities. The combined evidence suggests that systemic risk is a useful supplementary source of information in capital markets. In Chapter 3, we investigate the role of news media on international loan pricing. Employing an international sample of 12,422 bank loan facilities across 37 countries spanning the period from 2000-2016, we find that both media coverage and positive media sentiment reduce the bank loan interest rate spread, which can be achieved through the media by mitigating information frictions, reducing information risks, and enhancing the competition among lenders. Moreover, we show that favourable aggregate media sentiment increases the participation probability of non-leader bank lenders and reduces the percentage share of the leading banks involving syndicated loan issuances to borrowers. We further document that this negative relationship is more pronounced in countries with better accounting and trading information environments, higher representation of privately owned media newspapers, and lower government control of banks. Our main conclusions remain valid after carefully considering endogeneity issues and conducting various robustness tests. In Chapter 4, we examine the effect of Asset-backed Securitisation (ABS) on corporate risk-taking. After careful considerations of self-selection bias and endogeneity, we find that the origination of ABS is positively associated with corporate risk-taking, and more borrowing through ABS economically and significantly increases corporate risk-taking incentives. Employing hand-collected ABS data from 10-K filings in the EDGAR database, we document that firms with larger ABS borrowing capacity and less consumption of credit gain from ABS show more risk-taking incentives afterward. Further analysis suggests that the ABS systematically affected risk-raking, but unequally across firms. The findings support three distinct theoretical views. First, decreases in the costs of capital lead corporate to invest in risker projects. Second, assets liquidity positively influences corporate risk-taking behaviour. Third, the accessibility of external financing is positively related to risk-taking. The findings highlight the relation between corporate financing and investment decision.