Three Essays on Share Repurchases, Trade Credit and Carbon Emissions: Evidence from Brand Capital in the US.

Abstract

This thesis is composed of three essays that investigate how brand capital has influenced share repurchases, trade credit and carbon emissions in US listed firms. Firms in the US have recently invested a substantial amount in advertising expenses to develop sustainable and robust brand capital. These three essays provide empirical insights into how brand capital influences corporate strategies and outcomes across operational, financial and environmental sustainability aspects. Taken together, these essays contribute to the ongoing discussion about the implications of the role of brand capital, highlighting how brand capital enhances shareholder value, strengthens stakeholder relationships and promotes environmental responsibility. This thesis provides valuable implications for corporate managers, policymakers and scholars interested in the intersection of investment planning, financing decision making and environmental sustainability strategy development. Chapter 1 introduces this thesis by providing the motivation, presenting the findings, explaining the contribution behind the research and outlining an overview of the thesis’s structure. Chapter 2 is entitled “Brand Capital and Share Repurchases”. This chapter examines the association between brand capital and share repurchases based on a large sample of publicly listed non-financial US firms over the period 1994–2023. The study found that firms exhibiting higher levels of brand capital show a statistically significant and positive relationship with the extent of share repurchases activities. The cross-sectional analyses indicate that the influence of brand capital on share repurchases is more pronounced for firms characterised by strong corporate governance and a good financial position. The results remain consistent with the base model when employing alternative measures of brand capital or share repurchases and by using an alternative depreciation rate to calculate brand capital. Endogeneity and self-selection tests indicate the results are robust. Overall, the study found that more intense brand capital plays a central role in the share repurchasing decisions of firms. This finding has important implications for investors, management, analysts and regulators. Chapter 3 is entitled “Brand Capital and Trade Credit”. This study examines the relationship between brand capital and the use of trade credit among US listed firms. Based on 37,788 firm-year observations spanning from 1994 to 2023, it found that brand capital firms relied more on trade credit provided by suppliers as a source of short-term financing. This finding is more evident among firms exhibiting greater financial constraints, with elevated corporate risk-taking. These findings remain consistent after applying alternative measures of trade credit, brand capital specifications, depreciation rates to estimate brand capital and an alternative regression model. The findings are not driven by omitted variable bias or endogeneity concerns. Overall, the findings underscore the pivotal role that brand capital plays in shaping firms’ short-term financing decisions as a reliable signal of trustworthiness, and provide valuable insights for managers, suppliers and financial stakeholders. Chapter 4 is entitled “Brand Capital and Carbon Emissions”. This study investigates the association between brand capital and carbon emissions of US publicly listed firms from 2003 to 2023. It provides robust evidence that brand capital intensity significantly and negatively affects carbon emissions. The cross-sectional analyses illustrate that this significant and negative association is more pronounced for subsamples with weak corporate governance, greater information asymmetry and higher agency costs. These results remain robust across several additional tests, including those that use alternative specifications of brand capital, varying depreciation rates applied in the measurement of brand capital, different measures of carbon emissions and applying a lagged regression approach. Overall, the findings demonstrate that intensive brand capital has a significant bearing on carbon emissions. These findings may be valuable for environmental policymakers, management, analysts, shareholders and other stakeholders who require action and reporting about climate change and the achievement of greenhouse gas emissions targets. Chapter 5 summarises the findings and suggests potential directions for future research.