| Abstract: |
Abstract: Firms operate in a complex economic environment where they interact
with a broad base of stakeholders. Stakeholders are interested in the economic
environment of the firm and its prospects to determine the value of their
claims. For this valuation a wide range of information sources is used which
per definition provide a depiction of the firm and its economic environment.
As the stakeholders are important to the firm, managers have incentives to try
to affect their assessment of the firm, by making opportunistic disclosure
decisions. In three essays, I examine topics revolving around this notion. In
the first essay I show that reporting regulation requires firms to recognize
their development activities as an asset on the balance sheet, even though the
firm is likely to have incentives to avoid recognition. In addition, I show in
this essay that it is not straightforward that required capitalization is
beneficial for the valuation of firms by their equity investors. In the second
essay I examine securitization transactions by U.S. banks, where they provide
an explicit guarantee. Due to the specific reporting regulation, it is
possible that the securitized loan portfolios no longer have to be recognized
on the balance sheet. This particular securitization is beneficial for banks
as the explicit guarantee reduces uncertainty for the buying party, making the
transaction more appealing during times of economic uncertainty. My results
indicate that even during the recent widespread financial crisis, where
arguably liquidity markets dried up, these securitization transactions can
still be used by banks to enhance their liquidity. In the third essay I
examine the valuation by different stakeholders. In this essay I argue that
the value of the respective claims can be interpreted as a summary statistic
of all information used by the respective stakeholder. Then I show that the
valuation processes by different stakeholders, namely shareholders and CDS
contract holders, differs based on observable firm characteristics. My results
indicate that this difference in the valuation processes can be exploited
using the trading strategy developed in this essay. |