Title:
Essays on responsible and sustainable finance
Essays on responsible and sustainable finance
Author(s)
Malakar, Baridhi
Advisor(s)
Chava, Sudheer
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Abstract
The dissertation consists of three essays on responsible and sustainable finance. I show that local communities should be seen as stakeholders to decisions made by corporations. In the first essay, I examine whether the imposition of fiduciary duty on municipal advisors affects bond yields and advising fees. Using a difference-in-differences analysis, I show that bond yields reduce by 9\% after the imposition of the SEC Municipal Advisor Rule. Larger municipalities are more likely to recruit advisors after the rule is effective and experience a greater reduction in yields. However, smaller issuers do not seem to significantly benefit from the SEC Rule in terms of offering yield. Using novel hand-collected data, I find that the average advising fees paid by issuers does not increase after the regulation.
In the second essay, we analyze the impact of \$40 billion of corporate subsidies given by U.S. local governments on their borrowing costs. We find that winning counties experience a 15.2 bps increase in bond yield spread as compared to the losing counties. The increase in yields is higher (18 -- 26 bps) when the subsidy deal is associated with a lower jobs multiplier or when the winning county has a lower debt capacity. However, a high jobs multiplier does not seem to alleviate the debt capacity constraints of local governments. Our results highlight the potential costs of corporate subsidies for local governments.
In the third essay, we provide new evidence that the bankruptcy filing of a locally-headquartered and publicly-listed manufacturing firm imposes externalities on the local governments. Compared to matched counties with similar economic trends, municipal bond yields for affected counties increase by 10 bps within a year of the firm’s bankruptcy filing. Counties that are more economically dependent on the industry of the bankrupt firm are more affected and do not immediately recover from the negative impact of the corporate bankruptcy. Our results highlight that local communities are major stakeholders in public firms and how they are adversely affected by corporate financial distress.
The final essay examines whether managers walk the talk on the environmental and social discussion. We train a deep-learning model on various corporate sustainability frameworks to construct a comprehensive Environmental and Social (E\&S) dictionary. Using this dictionary, we find that the discussion of environmental topics in the earnings conference calls of U.S. public firms is associated with higher pollution abatement and more future green patents. Similarly, the discussion of social topics is positively associated with improved employee ratings. The association with E\&S performance is weaker for firms that give more non-answers and when the topic is immaterial to the industry. Overall, our results provide some evidence that firms do walk their talk on E\&S issues.
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Date Issued
2023-04-25
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Text
Resource Subtype
Dissertation