Paper: arXiv 2406.12995

Authors: Baridhi Malakar

Abstract

The dissertation consists of three essays on responsible and sustainable finance. I show that local communities should be seen as stakeholders to decisions made by corporations. In the first essay, I examine whether the imposition of fiduciary duty on municipal advisors affects bond yields and advising fees. Using a difference-in-differences analysis, I show that bond yields reduce by 9% after the imposition of the SEC Municipal Advisor Rule. In the second essay, we analyze the impact of USD 40 billion of corporate subsidies given by U.S. local governments on their borrowing costs. We find that winning counties experience a 15 bps increase in bond yield spread as compared to the losing counties. In the third essay, we provide new evidence that the bankruptcy filing of a locally-headquartered and publicly-listed manufacturing firm imposes externalities on the local governments. Compared to matched counties with similar economic trends, municipal bond yields for affected counties increase by 10 bps within a year of the firm filing for bankruptcy. The final essay examines whether managers walk the talk on the environmental and social discussion. We train a deep-learning model on various corporate sustainability frameworks to construct a comprehensive Environmental and Social (E and S) dictionary. Using this dictionary, we find that the discussion of environmental topics in the earnings conference calls of U.S. public firms is associated with higher pollution abatement and more future green patents.

Complexity vs Empirical Score

  • Math Complexity: 3.0/10
  • Empirical Rigor: 8.5/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: This empirical finance dissertation uses highly rigorous identification strategies (Difference-in-Differences, event studies, matched samples) and advanced NLP/deep-learning dictionary construction to examine municipal bonds and corporate E&S practices. While mathematical theoretical derivations are minimal, the empirical design, data collection, and robustness testing are executed to top-tier journal standards.

Research Flowchart

  flowchart TD
    A[Research Goal: Evaluate Corporate & Policy Externalities on Local Stakeholders and ESG Talk] --> B[Data Inputs: Municipal Bonds, Corporate Subsidies, Bankruptcies, & Earnings Call Transcripts]
    B --> C[Methodology 1: Difference-in-Differences Empirical Analysis]
    B --> D[Methodology 2: Deep Learning NLP & Custom E&S Dictionary Construction]
    C --> E[Municipal Bond Yield Analysis: Evaluate Advisor Fiduciary Duty, Subsidies, & Bankruptcy Costs]
    D --> F[Corporate Discourse Analysis: Map E&S Discussion to Real Firm Sustainability Outcomes]
    E & F --> G[Key Outcomes: -9% SEC Rule Yields, +15bps Subsidy Costs, +10bps Bankruptcy Spreads, & Higher Green Patents]