Doctor of Philosophy
This thesis includes three essays in mutual funds, empirical finance, and asset pricing.
The first essay explores the relation between mutual fund ownership and how it affects firms’ corporate social responsibility (CSR) engagements. The essay classifies mutual funds into CSR-friendly and CSR-unfriendly funds using a holdings-based, value-weighted mutual fund corporate social rating (MFCSR). The empirical results show that firms with higher CSR-friendly ownership are associated with increased future levels of CSR and the firms with higher CSR-unfriendly ownership are associated with decreased future levels of CSR. This result is robust after controlling for many observable firm characteristics and firm-specific unobservable characteristics and suggests that mutual fund shareholders’ CSR beliefs are important determinants of a firm’s social performance.
The second essay examines whether credit markets react to linguistic tone of accounting disclosures. The essay uses event study analyses and finds that high levels of uncertain tone in the 10-Q/K filings lead to a significant increase in credit default swap (CDS) spreads around the disclosure date. This finding is consistent with uncertainty in language, increasing perceived default risk. The magnitude of this effect monotonically decreases with maturity of CDS contracts. Moreover, this effect is robust to earnings surprises, management guidance, special firm-specific events, and alternative proxies of uncertainty. Overall, the results imply that the tone of accounting disclosures provides valuable, incremental information to the CDS markets.
The third essay studies whether the type of organizational structure in mutual funds affects the likelihood of window dressing. Using U.S. equity mutual fund data, I find that, conditional on inferior performance, team-managed funds have lower levels of window dressing and deceive significantly less than single-managed funds. The negative relation between team-managed funds and window dressing is not driven by various fund characteristics that differ between single- and team-managed funds. This relation is especially significant when other forms of fund governance mechanisms are low. Thus, the findings support the notion that the team form of organization helps reduce the incentive to deceive.
Ramani, Srikanth, "Three Essays in Empirical Finance" (2018). Electronic Thesis and Dissertation Repository. 5474.