Three Essays in Corporate Finance and Accounting

  • Yi Zhang

Student thesis: Phd


This thesis consists of three self-contained essays studying the topics of in the field of financial reporting frauds, cost of equity, and cost of bank credit in various contexts. In the first essay, I examine the impact of CEOs' political promotion incentives on firms' financial reporting fraud using a sample of state-owned enterprises in China. Based on a unique dataset of preceding CEOs' promotions, I find that CEOs' political promotion incentives significantly decrease the propensity of firms' financial reporting misconduct. This effect persists after the preceding CEOs' promotion. In addition, the effect is more pronounced when the current CEOs have higher promotion prospects and when the firms' information environments are more transparent. The findings shed light on the mitigating effect of CEO's non-pecuniary incentives on agency conflicts and corporate fraud. In the second essay, I study the association between government subsidies and the cost of equity using a sample of U.S. listed firms. I find a negative association between government subsidies and firms' cost of equity. And the results are robust to a battery of robustness tests. I also find evidence that government subsidies decrease firms' cost of equity by improving firms' information environment and their fundamental performance. Additionally, both tax-related and non-tax-related subsidies have significant impacts on the cost of equity and state-level subsidies have a more significant impact than federal and local-level subsidies. Overall, the evidence is consistent with government subsidies having a significant impact on firms' financing costs. In the third essay, I investigate the intra-industry spillover effects of industry rivals' ESG incidents on firms' loan spreads. Exploiting the event-based ESG records of European firms, I find that industry rivals' ESG incidents lower a firm's subsequent loan spreads. This intra-industry spillover effect pertains to both the aggregate ESG records and various subcategories. It is stronger when rivals are listed firms or bigger firms, consistent with the significance of an incident's salience in ESG spillover process. Importantly, this effect is more pronounced among borrowing firms with better ESG conduct and those that operate in more competitive industries, suggesting the competition effect dominates the contagion effect during spillover.
Date of Award31 Dec 2022
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorNing Gao (Supervisor) & Cheng Zeng (Supervisor)


  • Political promotion; financial reporting fraud; preceding CEO; state-owned enterprises
  • Government subsidy; implied cost of equity; financing cost
  • ESG; loan spread; spillover effect

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