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    The financial impacts of climate risk : the dissertation presented in fulfillment of the requirements of the degree of Doctor of Philosophy, PhD in Finance at Massey University, Manawatū, New Zealand
    (Massey University, 2025-11-13) Trinh, Hai Hong
    Drawing on state-level data on temperature anomalies, the dissertation contributes to the growing literature on the financial impacts of climate change on US-headquartered firms. Benchmarking long-term climate change, the first two chapters are empirical corporate finance papers examining the impacts of statewide climate change risks on corporate payout policy and the value of firms' financial flexibility. The third chapter is an asset-pricing paper that predicts corporate climate sensitivity of firms’ stocks to state-level climate change as a new systematic risk factor. The first chapter shows that long-term climate change adversely affects corporate dividend payout policy. With state-level temperature anomalies (SLTA), the impacts of climate change on corporate payout are severely persistent when firms are exposed to abnormally warmer temperatures. Cash holdings, trade credit, and market leverage present statistically significant mediating roles in the impacts of long-term climate change on corporate payout policy. The impacts of SLTA on corporate payout are pronounced for firms with higher vulnerability to climate transition risk (e.g., polluting firms) since the Paris Agreement (COP21). Smaller and younger firms and firms with higher tangibility are sensitive to the long-term impacts of climate change across US states. The contributions of the study to related literature are threefold. First, the study shows that the consequences of climate change on firms are chronically severe. With the persistent predicted decrease in dividend policy, climate change affects firms’ growth prospects, with its geographical complexity, escalating earnings uncertainty for firms. Second, the long-term systematic risks of climate change imposed on firms are multifaceted, with high geographical divergence, for which firms might face great challenges in opting for flexible and reliable financing choices in the long-term period. The impacts of SLTA on corporate dividends are persistently robust when the study controls the mediating effects of corporate financial policies and the moderating effects of other climate risk factors. The geographical complexity of long-term climate change impacts on firms is investigated in the second chapter through the lens of corporate financial flexibility. The second chapter shows that long-term climate change is adversely associated with the value of corporate financial flexibility (VOFF). Using the forward-looking and market-based measure, the predicted decrease in VOFF supports evidence from the first chapter by showing that long-term climate change systematically affects firms’ growth opportunities across the US states. The impact of SLTA on firms’ VOFF is persistent for firms with higher market-to-book values and larger firms. The impacts of long-term climate change on the VOFF are robust when the study controls the mediating effects of financial policies and the joint effects of other climate-related externalities. The third chapter estimates the state-level corporate climate sensitivity (SL-CCS) to temperature anomalies. Using the predicted SL-CCS for each firm’s stock, the study examines whether the financial market is pricing the SL-CCS betas as a new systematic risk factor. The broad findings show that the pricing of financial markets to the SL-CCS betas is conditional on the levels of global warming across the US states. Investors demand a premium when firms’ stocks are exposed to abnormally warmer temperatures; otherwise, there is a negative association between SL-CCS betas and firms’ stock returns (RET). The varying associations between SL-CCS betas and RET are aligned with our predictions when the study tests for other endogenous and exogenous climate-related risk factors.
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    Essays on sustainability, corporate disclosure, and economic uncertainty : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Manawatu Campus, New Zealand
    (Massey University, 2025-07-24) Huang, Kai
    This thesis consists of three essays. Essay one investigates the relationship between accounting conservatism, specifically bad news timeliness, and corporate environmental disclosure. This study identifies a significant negative relationship between the timeliness of bad news disclosure and corporate environmental disclosure. Further analysis indicates that socio-political pressures moderate this relationship. Specifically, while firms generally align with stakeholder preferences by promptly disclosing negative earnings news, those with executives in government-nominated positions tend to increase environmental disclosure due to stronger socio-political pressures. Additionally, the negative association between bad news timeliness and environmental disclosure is weaker among heavy polluters, who face stricter environmental regulations. This study underscores how top management strategically handles the disclosure environmental information. Essay two explores the impact of oil price uncertainty (OPU) on corporate green innovation disclosure behaviour. Drawing on textual analysis of annual and social responsibility reports from Chinese listed companies, the study constructs an innovative measure of green innovation disclosure intensity. It identifies a significantly positive relationship between oil price volatility and the level of green innovation disclosure, suggesting that firms respond to energy uncertainty by enhancing transparency about their environmental sustainability. Robustness checks and endogeneity analyses confirm these findings. Furthermore, the analysis reveals that firm-level characteristics, such as environmental performance, legitimacy demands, and political connections, moderate this relationship. The positive effect is amplified in firms exposed to higher regional environmental regulation intensity and market-based green initiatives. This essay contributes to the growing literature on corporate sustainability by demonstrating the role of energy uncertainty in shaping corporate transparency in green innovation. Essay three examines the interplay between firms oil price uncertainty sensitivity and corporate green innovation in the context of geopolitical tensions. Using a unique measure of firm-level geopolitical tensions derived from destination country-firm data in the China Customs Dataset, the study finds that firms more exposed to OPU are more likely to engage in green innovation. Geopolitical tensions significantly amplify this relationship, with tensions originating from supplier countries further amplifying the urgency for green innovation efforts. Additional analyses reveal that domestic supply chain alliances and improved supply chain efficiency reduce urgency of green innovation when facing heightened uncertainties. Moreover, we find that the interacted impacts of OPU exposure and geopolitical tensions on green innovation are more pronounced in firms with higher international exposure, lower government subsidies, and greater competitive pressures. This essay underscores the influence of external shocks, such as energy and geopolitical crises, in driving firms toward sustainable innovation strategies.
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    Essays on stock misvaluation : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Albany, New Zealand
    (Massey University, 2024-07-29) Feng, Qifang
    This thesis consists of three essays on stock misvaluation in the Chinese stock market. The Chinese stock market is dominated by risk-seeking speculators with behavioural biases. The first essay explores whether this leads to stock misvaluation and generates return premiums. We modify a pricing deviation-based approach developed by Rhodes–Kropf et al. (2005) by adding ownership classification in benchmark regressions to measure stock misvaluation, because one feature of many Chinese companies is state-ownership. We find that the accounting variables of the pricing deviation-based approach can explain more of the within-industry variation in firm value of state-owned enterprises (SOEs) than for non-state-owned enterprises (non-SOEs). The misvaluation effect of SOEs is stronger than non-SOEs, while the misvaluation of SOEs corrects faster than that of non-SOEs. Moreover, we find that loadings on the misvaluation factor positively forecast the cross-sectional returns in the rolling-window Fama-Macbeth two-stage regressions. The misvaluation effect in the Chinese stock market is significant. The second essay examines the effect of market constraints on stock misvaluation. A pioneering study by Chang et al. (2014) demonstrates that intensified short-selling activities, not margin-trading activities, improve price efficiency after the ban on margin trading and short selling is lifted. We find that their finding is subject to the limitation of the short sample period and the result reverses after extending the sample period to December 2020, primarily due to the soaring margin-trading activities. The imbalanced development of margin trades and short sales positively affects stock misvaluation, escalating overvaluation while reducing undervaluation. The positive effect of the imbalanced trading activities on misvaluation is primarily sourced from margin trades. We argue that margin traders are information providers whose trading activities reduce undervaluation. The third essay investigates the relationship between firm-level environmental, social and governance (ESG) score, and stock misvaluation. We find that the ESG score is negatively and significantly related to stock misvaluation. We extend our research by analysing the three pillars of ESG, as each pillar measures different aspects of a firm. The G score is negatively associated with stock misvaluation, effectively mitigating deviations from intrinsic value for overvalued and undervalued firms. The S score causes overvaluation, while the E score does not have a significant influence on misvaluation. These findings enhance the importance of evaluating E, S and G separately. The overall ESG score may counterbalance the influence of each individual ESG pillar on stock misvaluation. Further analyses show an influencing role of ESG (G) disclosure score in the ESG(G)- misvaluation relationship. The negative effect of the ESG (G) score on misvaluation is attributed to increasing information transparency.
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    Essays on China's real estate market : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Economics at Massey University, Manawatu Campus, New Zealand
    (Massey University, 2024-04-10) Mao, Yiran
    This thesis examines the factors that affect the real estate market in China from the perspectives of sentiment, place-based policies, and tariff shocks. The results are presented in three stand-alone empirical chapters. Chapter 2 probes the influence of sentiment on house prices within China. We construct a novel social media sentiment index, which quantified the tone of Weibo posts relating to "housing market'' from 2010 to 2020 across China's 35 largest cities. This index can predict house price changes up to six quarters ahead, even after factoring in economic fundamentals. These findings, robust to numerous checks, are not driven by announced policy modifications, unobserved fundamentals, or censorship bias and therefore reinforce theories of social learning and, to a minor degree, of animal spirits. Chapter 3 investigates the impact of the merger of suburbs into urban districts on property prices, using Beijing as an example and utilizing a difference-in-differences approach, within an event study framework. The results show that such mergers lead to a substantial surge in house prices in the rezoned areas. In contrast, the non-rezoned border districts experience a decline, with localized impacts in both scenarios. The merger negatively affects the economically disadvantaged, evident by the pronounced decline in house prices for low-priced properties in non-rezoned border districts and a smaller increase in rezoned ones. Further analysis reveals that the merger has a positive spillover effect in surrounding counties, with the effect decreasing as the distance to the rezoned districts increased. Chapter 4 analyzes the impacts of the US-China tariff war on commercial building rents across Chinese cities using Bartik-style tariff exposure proxies. This analysis finds a one percentage point increase in the US tariff exposure resulted in a 1.03 percent decrease in commercial building rent growth after one quarter, ceteris paribus. In contrast, China's retaliatory tariff has no significant impact on the growth of commercial building rents. Additionally, the analysis reveals differences in rent responses, with areas of elevated US dependence showing intensified detrimental effects, while superior financial conditions, societal stability, innovation, and geographical placement showing mitigated effects. Furthermore, the chapter reports that tariff exposures from the US and China exerted their influences through different channels, subtly affecting rent growth. The insights derived from this thesis are pivotal for policy formulation in developing nations. Firstly, sentiment, prominently reflected through social media, exerts a tangible and foreseeable impact on real estate valuations. This indicates that policymakers should monitor public sentiment as a precursor for probable escalations or depreciation in property markets. Secondly, urban planning and rezoning decisions can induce significant impacts on housing values in local and neighboring markets. Thus, it is imperative for policymakers to judiciously evaluate the implications of such initiatives, particularly their repercussions on less affluent demographics. Lastly, external economic disruptions, like the US-China tariff war, can profoundly influence commercial real estate rents, especially those cities intertwined with international trade. The adverse effects are palpable in both China and the US, indicating a need for policymakers to fortify the robustness of property markets against external perturbations by diversifying economic partnerships and instituting provisional strategies.
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    Essays on stock price crashes : a thesis presented in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Finance, School of Economics and Finance, Massey University
    (Massey University, 2024-03-29) Roy, Suvra
    This thesis comprises three essays that contribute to the literature on the consequences of stock price crashes. Essay One explores the post-crash responses of managers, the motives behind those responses, and the effects of those management responses on shareholders. The essay finds that managers of the crashed firms change their course of action to regain the trust of investors and improve firm value. Managers shift their attention towards enhancing transparency, optimizing investments, resolving internal conflicts, and investing in social capital and employee well-being. These initiatives contribute to enhancing the firm's value. Furthermore, this research proposes that management engages in these measures with consideration for their job security. Essay Two investigates the extent to which firm systematic risk changes following stock price crashes. It shows that stock price crashes result in increased systematic risk. This is evident across firms with both low and high betas. The higher systematic risk following a crash primarily stems from heightened default risk and results in equity financing becoming more expensive. Essay Three examines whether a firm price crash leads to the returns of the firm’s non-crash peer firms co-moving more with the returns of the market. The essay finds that this does occur. Investors focus more on firms that have experienced a crash while paying less attention to their non-crashed peer firms. This suggests that the investor trading behavior of these peer firms relies less on specific stock-related news and more on general market trends. The essay does not find any evidence to consider internal as well as external monitoring and information asymmetry as possible mechanisms of investor distraction. Overall, these essays provide contributions to the literature on stock price crash risk, financial markets, and corporate risk management. The thesis highlights how stock price crashes impact management responses, systematic risk, and the behavior of non-crashing peer firms, offering valuable insights for managers, investors, and market regulators to manage and respond to such events effectively. The thesis suggests that managers need to ensure their actions are taken post-crashes and potentially even before to prevent adverse events. Increased firm beta post-crash affects equity financing, portfolio management, risk assessment, and hedging decisions. Understanding firms’ systematic risk holds implications for managers, portfolio managers, and market regulators to manage firm systematic risk effectively. This thesis also documents a new source of return co-movement distinct from market-level shocks.
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    Labour market friction effect on corporate performance : evidence in the global market : a dissertation submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, School of Economics and Finance, Massey University
    (Massey University, 2023-08-31) Bai, Hengyu
    This thesis represents the first academic endeavour to investigate the impact of labour market friction on corporate performance in a global context. In traditional neoclassical economic theory and relevant research, human capital was considered merely an input to generate economic value. Unemployed workers were assumed to fill vacant job positions perfectly, similar to interchangeable machine parts. However, as understanding has evolved, economists now recognise the complexities of filling a job vacancy, which needs to take into account the skills, geographic locations, labour preferences, and various objective factors of the labour force. Consequently, a mismatch often occurs between unemployed workers and vacant jobs, resulting in simultaneous unemployment and job vacancies. This phenomenon is termed labour market friction. This thesis comprises three subprojects, each contributing a distinct essay. The first essay examines the effect of labour market friction on expected stock returns in the Chinese stock market. Utilising the portfolio sorting approach and the Fama-MacBeth regression model, the findings indicate that firms with higher labour friction risk are likely to experience higher stock returns in the subsequent month. This suggests that labour friction risk serves as a significant risk factor in asset pricing. Additionally, the study reveals that the positive effect of labour friction on expected stock returns is more pronounced in firms with either high productivity or poor employee welfare. Furthermore, firms in regions with high levels of development are more likely affected by the labour friction risk. The second essay expands the scope from the Chinese stock market to global stock markets, including North America, Asia-Pacific, and Europe. The results reveal regional variations in the impact of labour market friction on expected stock returns. Specifically, labour friction risk has a negative association with expected stock returns in North American markets, whereas it is positively correlated in Asia-Pacific markets. The significant labour market friction effects are pronounced in different industries due to the varieties of labour market structures, where the North American markets contain a large partial of high technology companies, while the Asia-Pacific markets are dominated by numerous industrial companies. There is no significant relationship between labour friction risk and expected stock returns in European markets. The study also finds that the effect of labour friction is particularly pronounced in markets that are non-immigrant or non-English-speaking, providing higher external labour supply and mobility in such markets, which reduces firms’ recruitment pressures. The third essay centres on Corporate Social Responsibility (CSR) behaviours under the influence of labour market friction in a global setting. The results suggest that firms facing higher labour friction risks are more inclined to engage in CSR activities, even when controlling for year, industry, and region effects in the regression model. This CSR engagement is notably more prominent in markets with a higher demand for labour, characterised by a higher number of new businesses and job vacancies. These findings remain consistent across markets that encourage business creation and expansion through strong investor protection and low labour taxation policies. Markets with higher levels of advanced education have a more significant labour market friction effect on CSR decision-making as they have numerous labour-intensive firms which require a large labour force. Additionally, when labour unions have the strong bargaining power to protect the welfare of employees, firms are less inclined to conduct CSR activities due to the less function in controlling the labour market friction risk. In summary, this thesis contributes to the existing literature by providing empirical evidence of the effects of labour market friction on corporate performance and behaviours across different global markets. It demonstrates that the impact of labour market friction varies due to differing labour market policies and structures and is significantly influenced by the dynamics of labour supply and demand. The insights derived from examining labour market friction across diverse markets have critical implications for both corporate managers and policymakers seeking to mitigate the associated risks.
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    Essays on stop-loss rules : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
    (Massey University, 2021) Dai, Bochuan
    Stop-loss rules are trading rules that involve selling a security when its price drops by a certain amount and buying the security back when its price rises above a pre-specified level. They are popularly used by practitioners. These rules are designed to protect gained profits as their sale trigger the price to be adjusted higher as prices increase. This thesis contributes to the literature on stop-loss rules in financial markets. The first essay investigates the time-series and cross-sectional determinants of stop-loss rules for risk reduction in the U.S. stock market. It finds that, even though stop-loss rules have poorer mean returns to a mean-variance optimal benchmark, they are effective at stopping losses. These rules reduce overall and downside risk, especially during declining market states. The transaction costs analysis shows that the significant effectiveness of risk reduction holds for these rules with larger stop-loss thresholds. Essay two examines the performance of stop-loss rules from the perspective of international equity market allocation. International diversification provides potential for larger returns but often induces higher risks. Thus, it is a natural setting to consider stop-loss rules from a global point-of-view. This essay finds that stop-loss rules are an important factor of international equity allocation in a parametric portfolio policy setting. These rules generate portfolios with larger mean and risk-adjusted returns. This result is economically stronger in declining markets. The outperformance is robust once the transaction costs are accounted for. Essay three shows that stop-loss rules enhance the returns to stocks with lottery features. Individual investors have a strong preference for lottery stocks that typically have irregular enormous gains and frequent small losses. Stop-loss rules are useful at reducing losses and protecting gains from large price rises. This essay highlights that the sell signals of popular technical rules and time-series momentum rules are consistent with stop-loss rules, thereby effectively increasing the risk-adjusted returns of lottery stocks. These rules would have helped investors avoid instances of major historical drawdowns and are particularly beneficial in recessionary markets. Some rules are robust to the inclusion of transaction costs.
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    Essays on dynamics of the housing market : a thesis presented in fulfilment of the requirement for the degree of Doctor of Philosophy in Finance at Massey University, Albany, New Zealand
    (Massey University, 2021) Nguyen, Thi Thu Ha
    As the largest proportion of a household’s wealth is invested in houses, a household’s saving and consumption is highly likely to be affected by the movement of housing markets. Economists are also very interested in housing price movements, due to its significant impact on general economic wellbeing and business cycles. The US housing collapse is commonly referred to as the trigger of the global financial crisis (GFC), leading to stronger demand from both the public and policymakers for in-depth analysis of housing markets. This thesis provides three empirical studies that aim to explore the dynamics of housing markets. The first essay analyses the relationship between immigration and housing markets with a focus on the regional differences within a country. Among the three housing market indicators studied (prices, rents, and price-to-rent ratios), the impact of immigration is found to be most strongly associated with rents and most weakly associated with prices. A negative relationship is reported between immigration and price-to-rent ratios, implying that in an overvalued housing market, the extent of deviation from equilibrium would have been even greater without immigration. Increased global financial integration as a result of improvements in the specification of trade, innovations in finance, and advances in information technology has led to increased connectedness between financial markets. Against this backdrop, the second essay measures the equicorrelation and connectedness between housing and oil markets. The results provide robust evidence of the existence of strong connectedness between these markets. The results also indicate that the connectedness is time variant, reaching its peak during the financial crisis. Among the studied markets, the US housing market is found to be the dominant shock transmitter, spreading shocks to the other markets. During the GFC period, the oil market operated as an information transmission mediator, conveying shocks from the US housing market to other OECD housing markets, particularly in the net oil importing OECD countries. The third essay focuses on whether capital gain in housing markets smooths consumption. The results indicate that the appreciation of house prices is an effective channel of risk sharing. Furthermore, the analysis of the consumption response to long-run output shocks in three developed countries (Australia, Canada, and New Zealand) provides evidence that Canadian residents are the most sensitive to permanent domestic output shocks and that the consumption patterns of Australian residents remain unchanged.
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    Essays on the determinant and consequence of tournament incentives : evidence from China : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand
    (Massey University, 2020) Sun, Li
    This research investigates the determinant and consequence of tournament incentives using data of publicly listed Chinese firms. Understanding the role of the tournament incentive and its implications is crucial, since it affects firms’ profitability and, consequently, shareholders’ wealth. Furthermore, whether tournament incentives function as an effective governance tools has remained under-explored in emerging markets. Our study sheds new light on the use of tournament incentives in the Chinese market. This study is organized into three essays: (i) a survey of the existing literature on tournament incentives in the accounting and finance area; (ii) the relation between business strategy and tournament incentives; and, finally, (iii) the effect of tournament incentives on stock price crash risk. Essay One synthesizes the theoretical underpinnings of tournament models, reviews the extant empirical literature on the determinants and consequences of tournament incentives, critiques the findings, and offers suggestions for future research. We synthesize findings from 63 empirical papers and find that several firm-level fundamental and corporate governance variables affect the structure of corporate tournaments. Our review of the consequences of tournament structure reveals that tournaments affect financial reporting and auditing as well as firm-level operational and capital market-based outcomes. This review reveals that the existing accounting and finance literature lacks a strong justification for why one theory, rather than another, is favoured. Moreover, based on potential problems that may exist in empirical models, this review also offers some methodological implications for empirical tournament studies. In Essay Two, we investigate the association between business strategy and firm-level tournament incentives in China, and find that business strategy is positively associated with firm-level tournament incentives, as proxied by pay differences among senior executives. We further explore the association between tournament incentives and future firm performance, conditional on various business strategies. We find some evidence that the larger tournament incentives offered by firms following innovative strategies are associated with better operating performance. We also find that the positive relationship between business strategy and tournament incentives is manifested only for local, but not central, state-owned enterprises (SOEs). However, no differential evidence is found using firm performance analysis. Our study fills a gap in the existing tournament literature by incorporating business strategy as a critical determinant of the tournament incentives in the more cash-compensation setting of China. Finally, in Essay Three, we investigate the association between tournament incentives and firms’ stock price crash risk in China. We explore the Chinese setting, where a cash-based compensation system is the primary compensation scheme, as opposed to the equity-based incentive schemes commonly found in the U.S. We provide robust evidence that promotion-based tournament incentives, proxied by compensation differences among top executives, are negatively and significantly associated with firms’ stock price crash risk. We also find that conditional conservatism mediates the negative association between tournament incentives and price crash. Finally, we find that the negative relationship between tournament incentives and price crash is significant for the non-state-owned enterprises only. The findings advance our understanding regarding the corporate governance role of tournament incentives in protecting shareholders’ wealth, since the occurrence of stock price crash risk destroys shareholder value.