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Abstract

This thesis comprises three essays investigating whether the space economy is ready to attract capital and resources from the financial markets. Through an examination of the financial appeal of the space industry, I want to comprehend and identify ways to enhance the avenues of funding for space investment endeavours. Reducing the information asymmetries that exist in high-technological investment ventures, which are typically associated with substantial risks, especially in space infrastructure, is the only way to overcome investors' resistance to investing in worthwhile initiatives.

Chapter 2 examines the impact of project finance evolution in mitigating and resolving the drawbacks associated with information asymmetries in the context of infrastructure financing. Overall, the paper demonstrates that project finance is a tailor-made financial technique that evolved over decades to adapt itself to changing and challenging market conditions by registering a steady growth since the 1980s. This finding is rooted in the landmark role played by project finance in reducing information asymmetries in the context of infrastructure financing. It explains how to financially support the development of the next generation of unconventional infrastructure, including those related to the space economy.

Chapter 3 investigates the diversification effect on firm value, measured by the natural logarithm of the firm’s Tobin’s q ratio, when a company diversifies from the aerospace and defence industry into the space economy. Companies choose whether to diversify or remain single-segment firms. To account for the endogeneity of the diversification choice, two econometric methods have been used: (i) a fixed-effects estimator and (ii) a propensity-score matching estimator. The outcomes show that, on average, diversification from the aerospace and defence industry into the space sector creates value. This is consistent with theories indicating that the benefits of economies of scope associated with diversification are sufficiently large to outweigh the agency costs associated with multi-segment conglomerates.

Chapter 4 studies the occurrence of price bubbles on a global sample of listed aerospace and defence stocks, specifically highlighting those that have chosen to engage in the space economy. To detect price exuberance episodes and identify multiple bubble window episodes, the General Supremum Augmented Dickey–Fuller and the Backward Supremum Augmented Dickey–Fuller recursive unit root tests of Phillips et al. (2015a, 2015b), benchmark econometric techniques for contemporary research works, were employed respectively. Furthermore, this study, through the estimation of a panel probit model, examined the determinants of speculative bubbles in the aerospace, defence, and space sectors. The onset of conflicts and the liberalization of the American space market for private investors represent the main instances in which episodes of price exuberance occurred. Outcomes revealed that the geopolitical risk and the stock trading volume are significant driving factors of equity bubbles. These findings highlight the pressing necessity for financial market watchdogs to tackle significant innovation challenges associated with the advancement of the space economy. These steps are necessary to safeguard investors from speculative bubbles in the future and to ensure an orderly and sustainable development of the space sector.

Publication Type:	Thesis (Doctoral)
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Bayes Business School Doctoral Theses Bayes Business School > Faculty of Finance Doctoral Theses

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