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Capital market implications of resource consent information in New Zealand listed company announcements : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Palmerston North, New Zealand
This thesis investigates the capital market impact of resource consent information
disclosed in New Zealand listed company announcements from 1991 to 2007. Since
1991, New Zealand environmental law has required individuals and businesses to
obtain resource consent approval to use resources or undertake development activities
that may have potentially adverse environmental impacts. Wide-spread criticisms of
excessive delays, uncertainties and compliance costs purportedly caused by the
consenting process have motivated this study of the economic implications to New
Zealand listed companies of resource consent information. This study adds to the New
Zealand capital market literature, employing an event study approach that allows for
rigorous, empirical testing of small samples that are problematic in small economy
research.
The impact of environmental regulatory delay on capital market reactions to capital
expenditure announcements is investigated. A measure of the expected time to gain
resource consent (regulatory) approval is developed and used as an indicator of
expected resource consent compliance costs. The event study results indicate positive
valuation effects from project announcements when the expected time to gain resource
consent approval is long. The key findings imply that by undertaking voluntary capital
expenditures with high environmental compliance costs, listed companies can create
strategic advantages. The results also suggest that if New Zealand legislators are able
to reduce environmental regulatory delays associated with capital expenditures through
further legislative changes, then the opportunity for firms to earn economic profits may
be diminished.
Investor access to timely, financial resource consent information is argued to be
problematic, consequently further investigations consider the capital market impact of
announcements to the stock exchange that disseminate information on the progress of
resource consent applications. The event study results indicate that resource consent
announcements are newsworthy and provide timely, valuable information to the
market. Further evidence suggests that media dissemination plays an important role in
the price-adjustment process for news of resource consent successes. Given the
prominence of environmental compliance issues for firms, the results of this thesis
underscore the importance of timely disclosures of firm environmental risk
management strategies and processes through stock exchange and press releases.