Essays in corporate finance

China has been growing rapidly over the last decades. The private sector is the driving force of this growth. This thesis focuses on firm-level investment and cash holdings in China, and the chapters are structured around the following issues. 1. Why do private firms grow so fast when they are more financially constrained? In Chapter 3, we use a panel of over 600,000 firms of different ownership types from 1998 to 2007 to find the link between investment opportunities and financial constraints. The main finding indicates that private firms, which are more likely to be financially constrained, have high investment-investment opportunity sensitivity. Furthermore, this sensitivity is relatively lower for state-owned firms in China. This shows that constrained firms value investment opportunities more than unconstrained firms. To better measure investment opportunities, we attempt to improve the Q model by considering supply and demand sides simultaneously. When we capture q from the supply side and the demand side, we find that various types of firms respond differently towards different opportunity shocks. 2. In China, there are many firms whose cash flow is far greater than their fixed capital investment. Why is their investment still sensitive to cash flow? To explain this, in Chapter 4, we attempt to introduce a new channel to find how cash flow affects firm-level investment. We use a dynamic structural model and take uncertainty and ambiguity aversion into consideration. We find that uncertainty and ambiguity aversion will make investment less sensitive to investment opportunities. However, investment-cash flow sensitivity will increase when uncertainty is high. This suggests that investment cash flow sensitivities could still be high even when the firms are not financially constrained. 3. Why do firms in China hold so much cash? How can managers’ confidence affect corporate cash holdings? In Chapter 5, we analyse corporate cash holdings in China. Firms hold cash for precautionary reasons, to hedge frictions such as financing constraints and uncertainty. In addition, firms may act differently if they are confident or not. In order to determine how confidence shocks affect precautionary savings, we develop a dynamic model taking financing constraints, uncertainty, adjustment costs and confidence shocks into consideration. We find that without confidence shocks, firms will save money in bad times and invest in good times to maximise their value. However, if managers lose their confidence, they tend to save money in good times to use in bad times, to hedge risks and financing constraint problems. This can help explain why people find different results on the cash flow sensitivity of cash. Empirically, we use a panel of Chinese listed firms. The results show that firms in China save more money in good times, and the confidence shock channel can significantly affect firms’ cash holdings policy.

Biochemical and epidemiological investigations of non-steroidal anti-inflammatory drug usage and related side effects in equids

Non-steroidal anti-inflammatory drugs (NSAIDs) are widely used in equine veterinary practice. These drugs exert their effect by inhibiting cyclooxygenase (COX) enzymes, which control prostaglandin production, a major regulator of tissue perfusion. Two isoforms of COX enzymes exist: COX-1 is physiologically present in tissues, while COX-2 is up-regulated during inflammation and has been indicated as responsible for the negative effects of an inflammatory response. Evidence suggests that NSAIDs that inhibit only COX-2, preserving the physiological function of COX-1 might have a safer profile. Studies that evaluate the effect of NSAIDs on COX enzymes are all performed under experimental conditions and none uses actual clinical patients. The biochemical investigations in this work focus on describing the effect on COX enzymes activity of flunixin meglumine and phenylbutazone, two non-selective COX inhibitors and firocoxib, a COX-2 selective inhibitor, in clinical patients undergoing elective surgery. A separate epidemiological investigation was aimed at describing the impact that the findings of biochemical data have on a large population of equids. Electronic medical records (EMRs) from 454,153 equids were obtained from practices in the United Kingdom, United States of America and Canada. Information on prevalence and indications for NSAIDs use was extracted from the EMRs via a text mining technique, improved from the literature and described and validated within this Thesis. Further the prevalence of a clinical sign compatible with NSAID toxicity, such as diarrhoea, is reported along with analysis evaluating NSAID administration in light of concurrent administration of other drugs and comorbidities. This work confirms findings from experimental settings that NSAIDs firocoxib is COX-2 selective and that flunixin meglumine and phenylbutazone are non-selective COX inhibitors and therefore their administration carries a greater risk of toxicity. However the impact of this finding needs to be interpreted with caution as epidemiological data suggest that the prevalence of toxicity is in fact small and the use of these drugs at the labelled dose is quite safe.