Abstract
This thesis examines the impact of corporate incentives on stakeholders’ outcomes. It comprises three essays presented as individual chapters.Chapter 2 examines whether managers are willing to compromise on service quality when faced with pressure to meet earnings benchmarks. We find that airlines facing earnings pressures have lower service quality. This decline in service quality in earnings-pressured airlines is associated with real earnings management (REM), particularly a cut in the costs of sales. The association between benchmark meeting or beating and service quality is mitigated in firms
with more dedicated institutional investors and when CEO compensation is correlated with customer satisfaction. However, this effect is short-lived and concentrated in the quarter after the firm just meets or beats earnings benchmarks.
Chapter 3 investigates the effect of debt covenant violations on firms’ toxic releases. Using a regression discontinuity design, I find that firms that breach a debt covenant are likely to release significantly more toxins. This is explained by a reduction in pollution abatement investment and operating expenses. In addition, I find that the relationship between toxic releases and debt covenants is mitigated in the presence of lenders concerned about green financing, and in
states with stronger regulatory enforcement. This impact is more pronounced when firms are financially constrained, when incentives to beat earnings expectation incentives conflict with environmental targets, and when investment horizons of institutional investors are short-term oriented.
Finally, Chapter 4 explores the effect of Corporate Social Responsibility (CSR) performance on debt contracting outcomes. We exploit the coverage expansion of the Asset4 dataset to Russell 2000 firms as a plausible shock to the availability of CSR performance information. We find that newly covered firms experienced more stringent changes in terms of loan spread and size.
Furthermore, loan contracts with newly covered firms are less likely to include a performance pricing provision. This phenomenon can potentially be attributed to the benchmarking incentives of creditors on the relative CSR performance of borrowers. Collectively, our results provide new evidence on the role of corporate CSR performance and information disclosure in the financing of firms.
| Date of Award | 30 Sept 2025 |
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| Original language | English |
| Awarding Institution |
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| Supervisor | Silvina Rubio (Supervisor) & Mariano Scapin (Supervisor) |