Three essays on corporate finance and investment
Creators: name: Wang, Jiawei (Brooke)
Publisher: name: University of Iowa
Year: 2023
Subjects: public abstract

description: This dissertation focuses on a range of topics in corporate finance and investments. In the first chapter, I study the effects of climate policy uncertainty on firms' environmental performances and efforts. The second chapter examines the role of lease financing in disaster-affected firms under collateral constraints. In the third chapter, we document the negative announcement returns on additions to the S&amp;P 500 index and investigate the likely reasons behind the flipped negative returns on upward additions to the S&amp;P 500 index and positive returns on downward deletions from that index.
description: In Chapter 1 titled "Waiting or Acting: The Effects of Climate Policy Uncertainty", I examine how climate policy uncertainty affects firms' environmental performances and efforts. I find that firms reduce toxic emissions under high climate policy uncertainty. Instead of a ``wait-and-see'' strategy, firms take pre-emptive actions by accelerating environmental innovation and adopting abatement technologies when climate policy uncertainty arises. Further analyses suggest that institutional investors withdraw capital from polluting firms under high uncertainty of climate regulation. By exploiting the lagged political polarization of the U.S. House roll-call votes and standard deviation of the pro-climate votes in the Senate on environmental and climate change-related bills to instrument the climate policy uncertainty index, I suggest that the effect of climate policy uncertainty on reducing emissions is causal.
description: In Chapter 2 titled "Natural Disasters and Firm Leasing: A Collateral Channel", I explore the role of lease financing in disaster-affected firms under collateral constraints. Disaster-affected firms demand funds for post-disaster reconstruction. However, the destruction of natural disasters leads to collateral constraints, which create external financing frictions. I find that affected firms obtain financing through operating leases after natural disasters. The significance of the findings highlights the importance of operating leases for collateral-constrained firms.
description: Chapter 3, titled "Negative Returns On Addition To The S&amp;P 500 Index And Positive Returns On Deletion? New Evidence On The Attractiveness Of S&amp;P 500 Versus S&amp;P 400 Indexes", is coauthored with Dr. Anand Vijh. We revisit the announcement returns on additions to the S&amp;P 500 index and find that the announcement returns of these changes have been the opposite of what has been documented for all S&amp;P 500 additions and deletions in an extensive literature. During 2016-2020, such ‘upward additions’ to the S&amp;P 500 index resulted in an average announcement excess return of -2.48% over a three-day period while ‘downward deletions’ to the S&amp;P 400 index resulted in an excess return of +1.37%. We explain these new results by the increasing total institutional ownership of S&amp;P 400 stocks. Our results thus show the increasing benefits of being included in the mid-cap S&amp;P 400 index relative to being included in the large-cap S&amp;P 500 index.