Copyright is owned by the Author of the thesis.  Permission is given for 
a copy to be downloaded by an individual for the purpose of research and 
private study only.  The thesis may not be reproduced elsewhere without 
the permission of the Author. 
 
  
 
 
 
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 
 
 
 
Carolyn Gail Wirth 
2011 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Copyright is owned by the Author of this thesis. Permission is given for a copy to be 
downloaded by an individual for the purpose of research and private study only. This 
thesis may not be reproduced elsewhere without the permission of the Author. 
  
i 
 
 
Abstract 
 
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 
ii 
 
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. 
   
iii 
 
Acknowledgements 
 
First of all, I wish to thank my supervisors, Professor Martin Young and Dr Jing Chi. 
Your support, encouragement and constructive criticism has been truly invaluable and I 
appreciate the time commitment that you devoted to my supervision. 
 
I am also grateful to my work colleagues who have so generously shared their insights 
with me. Dr Chris Malone patiently helped me with programming problems, Associate 
Professor Ben Marshall assisted with research ideas and spreadsheet functions, and 
several more staff offered suggestions along the course of the study. I am also 
indebted to Cameron Rhodes and Eric Liu who assisted with software issues, Fong 
Mee Chin who helped with use of databases, and Professor Chris Moore who 
convinced me that I could actually undertake such an ambitious project. 
 
To family and friends who have stood by me throughout the PhD experience, thank you 
so much.  You cannot know how much I value your support.  
  
iv 
 
Table of Contents 
 
 
ABSTRACT ........................................................................................................................................... i 
ACKNOWLEDGEMENTS ...................................................................................................................... iii 
TABLE OF CONTENTS .......................................................................................................................... iv 
LIST OF TABLES AND FIGURES ........................................................................................................... vii 
TABLES   .................................................................................................................................................. vii 
FIGURES   ..................................................................................................................................................viii 
CHAPTER 1: INTRODUCTION ............................................................................................................... 1 
1.1  INTRODUCTION ............................................................................................................................... 1 
1.2  BACKGROUND AND MOTIVATION ........................................................................................................ 1 
1.3  RESEARCH AIMS ............................................................................................................................... 4 
1.4  CONTRIBUTIONS OF THE RESEARCH ...................................................................................................... 6 
1.5  ORGANISATION OF THE THESIS ............................................................................................................ 7 
CHAPTER 2: INSTITUTIONAL BACKGROUND ......................................................................................... 9 
2.1  INTRODUCTION ............................................................................................................................... 9 
2.2  RESOURCE MANAGEMENT ACT 1991 .................................................................................................. 9 
2.3  CRITICISMS OF THE RMA ................................................................................................................ 11 
2.4  RMA AMENDMENTS ...................................................................................................................... 14 
2.5  THE DISCLOSURE ENVIRONMENT FOR RESOURCE CONSENT INFORMATION ................................................. 17 
2.6  CONCLUSION ................................................................................................................................ 20 
CHAPTER 3: LITERATURE REVIEW ...................................................................................................... 21 
3.1  INTRODUCTION ............................................................................................................................. 21 
3.2  THEORY AND EVIDENCE OF THE ECONOMIC EFFECTS OF ENVIRONMENTAL REGULATION ................................ 22 
3.2.1  Environmental regulatory events ......................................................................................... 22 
3.2.2  Economies of scale ............................................................................................................... 23 
3.2.3  The allocation of property rights .......................................................................................... 24 
3.2.4  Environmental performance ................................................................................................. 25 
3.2.5  Technology innovation and investment ............................................................................... 26 
3.2.6  Conclusion on the literature of the economic effects of environmental regulation ............. 30 
3.3  THEORY AND EVIDENCE OF THE SHAREHOLDER WEALTH IMPLICATIONS OF CAPITAL EXPENDITURES .................. 30 
3.3.1  Strategic sources of competitive advantage ........................................................................ 31 
3.3.2  Investment opportunities and free cash flow ....................................................................... 33 
3.3.3  Firm structure and size ......................................................................................................... 34 
3.3.4  Conclusion on the literature of the shareholder wealth implications of capital expenditures . 
 ............................................................................................................................................. 35 
3.4  THEORY AND EVIDENCE OF SHORT‐HORIZON CAPITAL MARKET REACTIONS TO FIRM‐SPECIFIC ANNOUNCEMENTS .... 
   .................................................................................................................................................. 36 
3.4.1  Efficient markets and rational expectations ......................................................................... 36 
3.4.2  The information content of firm‐specific environmental disclosures ................................... 40 
3.4.3  The influence of news characteristics ................................................................................... 41 
v 
 
3.4.4  The influence of news dissemination .................................................................................... 44 
3.4.5  The influence of investors’ characteristics ............................................................................ 47 
3.4.6  Conclusion on the literature of short‐horizon capital market reactions to firm‐specific 
announcements ................................................................................................................... 49 
3.5  CONCLUSION ................................................................................................................................ 50 
CHAPTER 4: HYPOTHESES AND DATA ................................................................................................ 52 
4.1  INTRODUCTION ............................................................................................................................. 52 
4.2  HYPOTHESIS DEVELOPMENT ............................................................................................................. 52 
4.3  RATIONALE FOR METHODOLOGIES EMPLOYED ...................................................................................... 59 
4.4  DATA, DATA SOURCES AND SAMPLE SELECTION: PROJECT INITIATION ANNOUNCEMENTS .............................. 60 
4.4.1  Project initiation announcement sample construction ......................................................... 60 
4.4.2  Index construction and announcement returns data compilation ....................................... 64 
4.4.3  Expected time to gain resource consent variable construction ............................................ 66 
4.4.4  Control variable sources ....................................................................................................... 73 
4.5  DATA, DATA SOURCES AND SAMPLE SELECTION: RESOURCE CONSENT ANNOUNCEMENTS .............................. 73 
4.5.1  Resource consent announcement sample construction ....................................................... 73 
4.5.2  Index construction, announcement returns, trading volume and market capitalisation data 
compilation .......................................................................................................................... 77 
4.5.3  Control variable sources ....................................................................................................... 79 
4.5.4  Contemporaneous media coverage data compilation ......................................................... 79 
4.6  CONCLUSION ................................................................................................................................ 81 
CHAPTER 5: METHODOLOGY ............................................................................................................. 82 
5.1  INTRODUCTION ............................................................................................................................. 82 
5.2  MEASURING EXPECTED TIME TO GAIN CONSENT APPROVAL .................................................................... 82 
5.3  PROJECT INITIATION ANNOUNCEMENT ABNORMAL RETURNS ................................................................... 84 
5.3.1  Empirical distributions of announcement daily returns and market model abnormal returns 
 ............................................................................................................................................. 84 
5.3.2  Non‐parametric tests ............................................................................................................ 87 
5.3.3  Event study robustness tests ................................................................................................ 91 
5.3.4  Cross‐sectional regression analysis of cumulative abnormal returns ................................... 92 
5.4  THE INFORMATION CONTENT AND ECONOMIC IMPACT OF RESOURCE CONSENT ANNOUNCEMENTS ................. 95 
5.4.1  Trading volume ..................................................................................................................... 95 
5.4.2  Empirical distributions of announcement daily returns and market model abnormal returns
 ............................................................................................................................................. 97 
5.5  THE INFORMATION CONTENT OF RESOURCE CONSENT ANNOUNCEMENTS .................................................. 98 
5.5.1  Non‐parametric tests ............................................................................................................ 99 
5.5.2  Event study robustness tests .............................................................................................. 102 
5.5.3  Cross‐sectional regression analysis of absolute cumulative abnormal returns .................. 102 
5.6  THE ECONOMIC IMPACT OF RESOURCE CONSENT ANNOUNCEMENTS ....................................................... 106 
5.6.1  Non‐parametric tests .......................................................................................................... 106 
5.6.2  Event study robustness tests .............................................................................................. 107 
5.6.3  Cross‐sectional regression analysis of cumulative abnormal returns ................................. 107 
5.7  CONCLUSION .............................................................................................................................. 110 
CHAPTER 6: EMPIRICAL RESULTS ‐ THE MARKET REACTION TO PROJECT INITIATION ANNOUNCEMENTS 
AND EXPECTED RESOURCE CONSENT COMPLIANCE COSTS .............................................................. 111 
6.1  INTRODUCTION ........................................................................................................................... 111 
6.2  EXPECTED TIME TO GAIN CONSENT APPROVAL .................................................................................... 111 
vi 
 
6.3  THE MARKET REACTION TO PROJECT INITIATION ANNOUNCEMENTS ........................................................ 114 
6.3.1  Descriptive statistics and correlations ................................................................................ 114 
6.3.2  Abnormal returns ............................................................................................................... 116 
6.4  THE INFLUENCE OF EXPECTED RESOURCE CONSENT COMPLIANCE COSTS ON STOCK MARKET REACTIONS TO PROJECT 
INITIATION ANNOUNCEMENTS ......................................................................................................... 118 
6.5  CONCLUSION .............................................................................................................................. 124 
CHAPTER 7: EMPIRICAL RESULTS – THE MARKET REACTION TO RESOURCE CONSENT 
ANNOUNCEMENTS ......................................................................................................................... 126 
7.1  INTRODUCTION ........................................................................................................................... 126 
7.2  THE INFORMATION CONTENT OF RESOURCE CONSENT ANNOUNCEMENTS ................................................ 126 
7.2.1  Entire sample absolute abnormal returns .......................................................................... 126 
7.2.2  Analysis of subsample absolute abnormal returns ............................................................. 128 
7.3  THE ECONOMIC IMPACT OF RESOURCE CONSENT ANNOUNCEMENTS ....................................................... 136 
7.3.1  Analysis of subsample abnormal returns ........................................................................... 136 
7.4  CONCLUSION .............................................................................................................................. 146 
CHAPTER 8: CONCLUSION ............................................................................................................... 148 
8.1  INTRODUCTION ........................................................................................................................... 148 
8.2  REVIEW OF RESEARCH AIMS, HYPOTHESES AND MAJOR FINDINGS ........................................................... 148 
8.2.1  The role of environmental regulatory delay in explaining capital market reactions to capital 
expenditure announcements ............................................................................................. 148 
8.2.2  The capital market impact of resource consent announcements ....................................... 151 
8.3  CONTRIBUTIONS OF THE THESIS ...................................................................................................... 154 
8.4  LIMITATIONS OF THE THESIS ........................................................................................................... 156 
8.5  FUTURE RESEARCH ....................................................................................................................... 158 
APPENDICES ................................................................................................................................... 159 
APPENDIX 1: LEGISLATION ENCOMPASSING THE RESOURCE MANAGEMENT ACT 1991 ........................................... 160 
APPENDIX 2: PROJECT INITIATION SAMPLE ANNOUNCEMENTS ............................................................................ 161 
APPENDIX 3: RESOURCE CONSENT SAMPLE ANNOUNCEMENTS ........................................................................... 163 
APPENDIX 4: LIQUIDITY ANALYSIS OF RESOURCE CONSENT SAMPLE AND MARKET INDEX STOCKS ................................ 168 
APPENDIX 5: PROJECT INITIATION ANNOUNCEMENT STUDY ROBUSTNESS TEST STATISTICS ........................................ 169 
APPENDIX 6: PROJECT INITIATION STUDY ROBUSTNESS TEST RESULTS ................................................................... 171 
APPENDIX 7: RESOURCE CONSENT STUDY ROBUSTNESS TEST RESULTS .................................................................. 176 
REFERENCE LIST .............................................................................................................................. 186 
 
 
 
 
  
vii 
 
List of Tables and Figures 
 
 
Tables 
 
Table 4.1  Project initiation sample analysis ........................................................................................................63 
Table 4.2  Market index data outlier analysis.......................................................................................................66 
Table 4.3  Sources of resource consent compliance costs ...................................................................................68 
Table 4.4   Summary statistics and correlations ‐ Expected time to consent (ETC) components and historical 
time to consent/abandon (TCA) ..........................................................................................................69 
Table 4.5  Resource consent announcements sample analysis ............................................................................75 
Table 4.6  Resource consent announcements sample: Average market capitalisation comparisons ..................78 
Table 4.7  Media coverage of resource consent events contemporaneous with stock exchange announcement 
by news classification ..........................................................................................................................81 
Table 5.1  Project initiation announcement return data and distributions ..........................................................85 
Table 5.2  Resource consent announcement return data and distributions ........................................................97 
Table 6.1   Cross‐sectional regression analyses of LNTCA (t‐statistics) ...............................................................112 
Table 6.2  Descriptive sample characteristics and correlations ..........................................................................115 
Table 6.3  Abnormal returns and cumulative abnormal returns around project initiation announcements .....117 
Table 6.4  Abnormal returns and cumulative abnormal returns around project initiation announcements by 
expected time to consent ..................................................................................................................119 
Table 6.5  Comparison of standardised abnormal returns and standardised cumulative abnormal returns 
around project initiation announcements by expected time to consent ..........................................121 
Table 6.6  Cross‐sectional regression analyses of project initiation announcement cumulative abnormal 
returns, (t‐statistics) ..........................................................................................................................122 
Table 7.1  Analysis of ranked absolute abnormal returns ..................................................................................127 
Table 7.2  Analysis of ranked absolute abnormal returns, pre‐ and post‐reform, December 2002 ...................129 
Table 7.3  Analysis of absolute abnormal returns by news classification ...........................................................131 
Table 7.4  GLS cross‐sectional rank regression model of absolute abnormal returns, (t‐statistics) ...................133 
Table 7.5  Analysis of ranked abnormal returns .................................................................................................137 
Table 7.6  Analysis of event day +2 ranked abnormal returns excluding day +2 contaminating events ............138 
Table 7.7  Comparison of pre‐ and post‐December 2002 standardised abnormal returns ................................139 
Table 7.8  Comparison of successful, uncertain and unsuccessful standardised abnormal returns ..................139 
Table 7.9  Analysis of abnormal returns by contemporaneous media coverage ...............................................141 
Table 7.10  GLS cross‐sectional rank regression model of abnormal returns, (t‐statistics) ..................................143 
Table 8.1  Hypotheses and conclusions for research aim 1 ................................................................................149 
Table 8.2  Hypotheses and conclusions for research aim 2 ................................................................................152 
 
Table A6.1  Analysis of abnormal returns – Market model using alternate market index ...................................171 
Table A6.2  Analysis of market‐adjusted returns ..................................................................................................172 
Table A6.3  Analysis of abnormal returns – Market model using alternate estimation period (‐170,‐10) ...........173 
Table A6.4  Robustness tests for Models 3 and 4 cross‐sectional regression analyses of project initiation 
announcement cumulative abnormal returns, (t‐statistics) ..............................................................174 
Table A6.5  Robustness tests for Models 5 and 6 cross‐sectional regression analyses of project initiation 
announcement cumulative abnormal returns, (t‐statistics) ..............................................................175 
Table A7.1  Analysis of ranked absolute abnormal returns – Market model using alternate market index.........176 
Table A7.2  Analysis of ranked absolute market‐adjusted returns .......................................................................177 
viii 
 
Table A7.3  Analysis of absolute abnormal returns – Market model using alternate estimation period (‐170, ‐10)
 ...........................................................................................................................................................177 
Table A7.4  Analysis of ranked absolute abnormal returns pre‐ and post‐reform, December 2002, using alternate 
market index ......................................................................................................................................178 
Table A7.5  Analysis of ranked absolute abnormal returns pre‐ and post‐reform, August 2003 .........................178 
Table A7.6  Analysis of absolute abnormal returns by news classification using alternate market index ............179 
Table A7.7  Supplemental tests for Models 3 – 7 cross‐sectional rank regression analyses of resource consent 
announcement absolute abnormal returns, (t‐statistics) ..................................................................180 
Table A7.8  Analysis of ranked abnormal returns – Market model using alternate market index .......................181 
Table A7.9  Analysis of ranked market‐adjusted returns ......................................................................................182 
Table A7.10  Analysis of ranked abnormal returns without variance adjustment ..................................................183 
Table A7.11  Comparison of successful, uncertain and unsuccessful standardised abnormal returns using alternate 
market index ......................................................................................................................................183 
Table A7.12  Analysis of abnormal returns by contemporaneous media coverage using alternate market index 184 
Table A7.13  Supplemental tests for Model 5 cross‐sectional rank regression model of abnormal returns, (t‐
statistics) ............................................................................................................................................185 
 
 
Figures 
Figure 4.1  Average market capitalisations – Resource consent announcements sample and market indices 
($million) ..............................................................................................................................................78 
Figure 5.1  Daily average normalised volume around resource consent announcements ....................................96 
Figure 6.1  Regression sample industry affiliations by short (ETCDUM=0) or long (ETCDUM=1) expected time to 
consent (n=33) ...................................................................................................................................113 
Figure 6.2  Full sample industry affiliations by short (ETCDUM=0) or long (ETCDUM=1) expected time to consent 
(n=46) ................................................................................................................................................113 
Figure 6.3  Full sample and ETC subsample cumulative abnormal returns around project initiation 
announcements .................................................................................................................................120