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Three Essays in Corporate Finance

LI, JIARONG (2022) Three Essays in Corporate Finance. Doctoral thesis, Durham University.

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Author-imposed embargo until 26 October 2025.


This dissertation, consisting of three essays, contributes to corporate finance in relation to corporate value creation. I explore three major areas: (1) corporate cash holding, (2) merger and acquisition (M&A) and innovation, and (3) ESG.

The first essay empirically examines the impact of managers' belief in luck on firms’ cash holding and the implications that this has for corporate value in Chinese listed firms. By proposing an individual’s zodiac year as a proxy for shock to one's perception of luck, the research finds that corporate cash holding temporarily rises in the zodiac year of the chairperson due to a belief in bad luck related to their zodiac. The rise of cash reserves is inefficient and suboptimal for the firm's value. The results provide support for the behavioural explanation of corporate structure choice and corporate value.

The second essay explores the impact of state ownership on post-M&A innovation performance. The study demonstrates that state-owned acquirers (SOAs) invest more in research and development (R&D) and generate more patents following M&A than their private-owned counterparts, and that the increase in R&D investment following M&A is more likely to occur in SOAs that are oriented toward responsible innovation, whereas the increase in patent counts following M&A is frequently observed in other SOAs. These findings indicate that state ownership in China drives acquirers’ post-M&A innovation, and that responsible innovation orientation distinguishes R&D investment and patent publishing growth trends.

The third essay investigates the financial benefit of firm’s environmental, social, and governance (ESG) efforts in the context of M&A in China. I discover a positive correlation between firms’ ESG rating prior to M&A and their subsequent stock and operational performance. I also demonstrate that for acquirers with high initial ESG standards, an increase in ESG rating has little effect on post-M&A performance, whereas a decrease in ESG rating can result in significant poor performance. Meanwhile, for acquirers with relatively low initial ESG standards, I observe a mirror image of this. These findings corroborate the instrumental stakeholder theory and the law of declining marginal value.

Item Type:Thesis (Doctoral)
Award:Doctor of Philosophy
Faculty and Department:Faculty of Business > Economics and Finance, Department of
Thesis Date:2022
Copyright:Copyright of this thesis is held by the author
Deposited On:10 Nov 2022 12:41

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