This document is downloaded from DR‑NTU (https://dr.ntu.edu.sg) Nanyang Technological University, Singapore. Three essays on corporate finance Liu, Zhenbin 2012 Liu, Z. (2012). Three essays on corporate finance. Doctoral thesis, Nanyang Technological University, Singapore. https://hdl.handle.net/10356/50662 https://doi.org/10.32657/10356/50662 Downloaded on 01 Oct 2021 12:04:59 SGT Three Essays on Corporate Finance Zhenbin LIU 2012 Zhenbin LIU Essays Finance Three on Corporate Three Essays on Corporate Finance Zhenbin LIU NANYANG BUSINESS SCHOOL 2012 Zhenbin LIU Three Essays on Corporate Finance Zhenbin LIU NANYANG BUSINESS SCHOOL A thesis submitted to the Nanyang Technological University in partial fulfillment of the requirement for the degree of Doctor of Philosophy 2012 ACKNOWLEDGEMENTS I express my appreciation to my committee members: Beng Soon Chong (Chairman), Chuan Yang Hwang and Angie Low, for their advice and help. In particular, I am greatly indebted to my dissertation chair, Beng Soon Chong, for his continuous help and support. I would like to thank Suman Banerjee, Xin Chang, Stephen Dimmock, David Hirshleifer, Jun-koo Kang, and Manju Puri for helpful comments and suggestions. I also appreciate the service and support provided by Cher Mui Luang Florence, Quek Bee Hua, Karen Barlaan, Amarnisha Mohamed Hussain and many others. Table of Contents Essay One: Does Corporate Social Responsibility Matter? Evidence from New Equity Issues .......... 1 Abstract ......................................................................................................................................................... 1 1. Introduction ........................................................................................................................................... 2 2. Data and Variables ................................................................................................................................ 9 2.1 Sample Selection ............................................................................................................................... 9 2.2 Dependent Variables ....................................................................................................................... 10 2.3 Corporate Social Responsibility ..................................................................................................... 11 2.4 Control Variables ............................................................................................................................ 13 2.5 Summary Statistics .......................................................................................................................... 14 3. CSR and Demand for Equity .............................................................................................................. 16 3.1 CSR and Revisions in the Terms of Stock Offerings ....................................................................... 19 3.2 CSR and the Exercise of Over-allotment Option ............................................................................ 27 3.3 CSR and Choice of SEO Offering Methods..................................................................................... 28 3.4 CSR and Changes in Institutional Holdings ................................................................................... 31 4. Effect of CSR on Equity Valuations ................................................................................................... 32 4.1 CSR and Underpricing of New Equity Issues ................................................................................. 33 4.2 CSR and SEO Announcement Returns ............................................................................................ 35 4.3 CSR and Long-run Return Performance ........................................................................................ 36 5. Conclusion .......................................................................................................................................... 42 Reference .................................................................................................................................................... 44 Table I. Sample Distribution by Year ........................................................................................................ 48 Table II. Summary Statistics ....................................................................................................................... 49 Table III. Effects of CSR on Revisions in Offer Price ................................................................................ 50 Table IV. Effects of CSR on Revisions in Total Number of Shares Offered ............................................. 51 Table V. Effects of CSR on Revisions in Total Proceeds ........................................................................... 52 Table VI. Effects of CSR on Revisions in Primary and Secondary Shares ................................................ 53 Table VII. Effects of CSR on the Exercise of Over-allotment Option ....................................................... 54 Table VIII. Effects of CSR on the Choice of SEO Offering Methods ........................................................ 55 Table IX. CSR and Changes in Institutional Holdings ............................................................................... 56 Table X. CSR and Underpricing of New Equity Issues .............................................................................. 57 Table XI. CSR and SEO Announcement Returns ....................................................................................... 58 1 Table XII. CSR and Long-run Return Performance ................................................................................... 59 Table XIII. Cross Sectional Analysis of Long-run Return Performance .................................................... 60 Appendix: The Open Letter to Investing Community from ICCR and IEHN ............................................ 61 Essay Two: The Directed Share Program (DSP) in Initial Public Offerings ...................................... 65 Abstract ....................................................................................................................................................... 65 1. Introduction ......................................................................................................................................... 66 2. Data and Sample Description .............................................................................................................. 72 2.1 Sample Selection ............................................................................................................................. 72 2.2 DSP Related Data ........................................................................................................................... 73 2.3 Control Variables ............................................................................................................................ 74 2.4 Summary Statistics .......................................................................................................................... 75 3. The reward hypothesis ........................................................................................................................ 77 3.1 Expected Underpricing and DSP .................................................................................................... 78 3.2 DSP and Strategic Underpricing .................................................................................................... 85 3.3 DSP and Actual Underpricing ........................................................................................................ 92 3.4 Alternative Hypotheses ................................................................................................................... 97 4. The Lockup on DSP .......................................................................................................................... 100 5. Conclusion ........................................................................................................................................ 105 Reference .................................................................................................................................................. 107 Figure I. DSP Time Trend ........................................................................................................................ 109 Figure II. Illustration of Strategic Underpricing ....................................................................................... 110 Figure III. DSP and IPO Underpricing ..................................................................................................... 111 Table I. Sample Distribution by Year ....................................................................................................... 112 Table II. Summary Statistics ..................................................................................................................... 113 Table III. Effects of Expected Underpricing on DSP ............................................................................... 114 Table IV. Effects of Expected Underpricing on DSP Terms Revision ..................................................... 115 Table V. Strategic Underpricing ............................................................................................................... 117 Table VI. The Incentive for Issuers with DSP to Reward the