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Financial Constraints And Stock Returns
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Book Synopsis Financial Constraints and Stock Returns by : Owen A. Lamont
Download or read book Financial Constraints and Stock Returns written by Owen A. Lamont and published by . This book was released on 1997 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test whether the impact of financial constraints on firm value is observable in asset" returns. We form portfolios of firms based on observable characteristics related to financial" constraints, and test for common covariation in the stock returns of these firms. Using several" different measures of financial constraints, we find that financially constrained firms' stock" returns move together over time. This financial constraint factor in stock returns is related to not well explained by, other empirically identified factors in asset returns. Constrained firms" have remarkably low returns in our sample period of 1968-1995, both unconditionally and in the" context of empirical asset pricing models. Financial constraint returns help explain returns" following initial public offerings and dividend omissions. We find only limited support for the" hypothesis that the relative performance of financially constrained firms reflects monetary" policy, credit conditions, and business cycles
Book Synopsis Financial Constraints and Stock Returns by : Owen A. Lamont
Download or read book Financial Constraints and Stock Returns written by Owen A. Lamont and published by . This book was released on 2008 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test whether the impact of financial constraints on firm value is observable in assetquot; returns. We form portfolios of firms based on observable characteristics related to financialquot; constraints, and test for common covariation in the stock returns of these firms. Using severalquot; different measures of financial constraints, we find that financially constrained firms' stockquot; returns move together over time. This financial constraint factor in stock returns is related to not well explained by, other empirically identified factors in asset returns. Constrained firmsquot; have remarkably low returns in our sample period of 1968-1995, both unconditionally and in thequot; context of empirical asset pricing models. Financial constraint returns help explain returnsquot; following initial public offerings and dividend omissions. We find only limited support for thequot; hypothesis that the relative performance of financially constrained firms reflects monetaryquot; policy, credit conditions, and business cycles.
Book Synopsis Financial Constraints and Stock Returns - Evidence from Australia by : H. Chan
Download or read book Financial Constraints and Stock Returns - Evidence from Australia written by H. Chan and published by . This book was released on 2010 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using multiple discriminant analysis, we construct an index that measures firms' external financial constraints in an Australian setting. We form portfolios of firms based on our financial constraints index and find that financially constrained firms earn lower return than their unconstrained counterparts. Moreover, stock returns of financially constrained firms are found to move together, indicating the potential existence of a financial constraints factor. Neither the variation nor the mean return of the constraints factor are well explained by existing asset pricing models, suggesting an independent role for our financial constraints factor in affecting stock returns.
Book Synopsis Financial Constraints, R&D Investment, and Stock Returns: Theory and Evidence by : Dongmei Li
Download or read book Financial Constraints, R&D Investment, and Stock Returns: Theory and Evidence written by Dongmei Li and published by . This book was released on 2007 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation uses research and development (R&D) data to examine the link between asset prices and financing constraints. Through a continuous-time real options model I show that there is a strong positive relation between financing constraints and stock returns, but only for high-R&D firms. Conversely, the model also predicts a strong positive relation between R&D and returns for highly constrained firms. Empirical results confirm these predictions. These findings not only explain the puzzling flat relation between financial constraints and stock returns documented in the literature, but also shed light on the economic source of the predictability of R&D investment on stock returns.
Book Synopsis Financial Constraints, Stock Liquidity, and Stock Returns by : Xiafei Li
Download or read book Financial Constraints, Stock Liquidity, and Stock Returns written by Xiafei Li and published by . This book was released on 2019 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines stock liquidity in explaining the mixed relations between financial constraints and stock returns and the pricing of stock liquidity across financially constrained and unconstrained firms. We find a negative relation in liquid portfolios and a positive relation in illiquid portfolios. Financially constrained firms have higher liquidity risk and earn a higher illiquidity premium than unconstrained firms. Financial constraints cannot be independently priced in stock returns and can only be priced in conjunction with stock liquidity in bad economic times. Stock liquidity is independently priced for financially constrained firms or in good times, but not for unconstrained firms.
Book Synopsis Financial Constraints, Debt Capacity, and the Cross Section of Stock Returns by : Jaehoon Hahn
Download or read book Financial Constraints, Debt Capacity, and the Cross Section of Stock Returns written by Jaehoon Hahn and published by . This book was released on 2005 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Theories of capital market imperfections have strong cross-sectional implications not only for corporate investment, but also for asset prices. Motivated by these theories, we develop a hypothesis about a differential effect of debt capacity on stock returns across financially constrained and unconstrained firms, based on a model of corporate investment under collateral constraints. The findings strongly support the hypothesis. Debt capacity is positively associated with stock returns in the cross section of financially constrained firms, after controlling for theoretical and empirical risk proxies such as beta, size, book-to-market, and momentum. The positive marginal impact of debt capacity is also economically significant. In contrast, debt capacity has no systematic relation with the cross section of financially unconstrained firms' stock returns. The results are robust to the way in which firms are classified into constrained and unconstrained groups and to the way in which debt capacity is measured. The findings suggest that cross-sectional differences in corporate investment behavior arising from financial constraints, predicted by theories of imperfect capital markets and supported by empirical evidence, are reflected in the stock returns of manufacturing firms.
Book Synopsis Are Financial Constraints Priced? Evidence from Firm Fundamentals and Stock Returns by : Murillo Campello
Download or read book Are Financial Constraints Priced? Evidence from Firm Fundamentals and Stock Returns written by Murillo Campello and published by . This book was released on 2010 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using comprehensive firm- and aggregate-level data, this paper studies the real and financial implications of capital market imperfections. We first examine whether financially constrained firms' business fundamentals (capital spending and operating earnings) are more sensitive to macroeconomic movements than unconstrained firms' fundamentals. We then examine whether financial constraint quot;return factorsquot; respond to macroeconomic shocks in tandem with the responses from business fundamentals. The evidence in this paper points to financial constraints affecting both fundamental quantities and asset returns.
Book Synopsis Financial Constraints and Stock Returns by : Hui Han
Download or read book Financial Constraints and Stock Returns written by Hui Han and published by . This book was released on 2001 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Cash Flow Constraints and Firms' Investment Behaviour by : D. R. Chapman
Download or read book Cash Flow Constraints and Firms' Investment Behaviour written by D. R. Chapman and published by . This book was released on 1994 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Short Constraints, Difference of Opinion and Stock Returns by : Mohanaraman Gopalan
Download or read book Short Constraints, Difference of Opinion and Stock Returns written by Mohanaraman Gopalan and published by . This book was released on 2007 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a new approach to analyzing the effect of short constraints on stock returns. Starting from the theory, we measure how short constrained a stock is by looking at month end outstanding short positions and other measures that proxy for heterogeneity in beliefs and ease of shorting a stock. Our proxies include analyst's forecast dispersion, institutional holdings, turnover (among others). Using monthly data for the period 1992 to 2000 on NASDAQ and NYSE stocks, we form portfolios using our measure of short constraints. We find that portfolio of stocks that are short constrained earn lower returns. We also observe that the most constrained portfolio earns a significant negative one month ahead abnormal return, after accounting for risk. One can interpret this evidence as being supportive of the common notion that constrained stocks might be priced higher today. We believe our work provides evidence that short constraints matter for asset returns. It also confirms the notion that arbitrage can sometimes be rendered ineffective in financial markets because of market frictions like short constraints which can lead to abnormal returns in stocks that are constrained. This is consistent with the idea of Limited Arbitrage of Shleifer and Vishny.
Book Synopsis Essays on Corporate Finance, Monetary Policy and Asset Pricing on London Stock Exchange by : Nikolaos Balafas
Download or read book Essays on Corporate Finance, Monetary Policy and Asset Pricing on London Stock Exchange written by Nikolaos Balafas and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financially Constrained Stock Returns by : Dmitry Livdan
Download or read book Financially Constrained Stock Returns written by Dmitry Livdan and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: More financially constrained firms are riskier and earn higher expected returns than less financially constrained firms, although this effect can be subsumed by size and book-to-market. Further, because the stochastic discount factor makes capital investment more procyclical, financial constraints are more binding in economic booms. These insights arise from two dynamic models. In Model 1, firms face dividend nonnegativity constraints without any access to external funds. In Model 2, firms can retain earnings, raise debt and equity, but face collateral constraints on debt capacity. Despite their diverse structures, the two models share largely similar predictions.
Book Synopsis Financial Constraints, Monetary Policy Shocks, and the Cross-Section of Equity Returns by : Sudheer Chava
Download or read book Financial Constraints, Monetary Policy Shocks, and the Cross-Section of Equity Returns written by Sudheer Chava and published by . This book was released on 2015 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the impact of unanticipated monetary policy changes on equity returns and document that financially constrained firms earn a significantly lower return following rate increases as compared to unconstrained firms. Trading volume is significantly lower for constrained firms on FOMC announcement days but the differential return response manifests with a delay. Further, unanticipated increases in Federal funds rate are associated with a larger decrease in expected cash flow news, but not of discount rate news, for constrained firms relative to unconstrained firms. Our results highlight how monetary policy shocks have a disproportionate real impact on financially constrained firms.
Book Synopsis Financial Constraints, Corporate Investment and Future Profitability by : Ronald Espinosa
Download or read book Financial Constraints, Corporate Investment and Future Profitability written by Ronald Espinosa and published by . This book was released on 2015 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence consistent with the idea that the implications of investment on future profitability differ for financially constrained and financially flexible firms. In particular, this study finds that the investment of financially constrained firms is associated with higher persistence in profitability than the investment of flexible firms. This paper also finds that this result is related to differences in future write-downs and goodwill impairments, suggesting that the difference in persistence in profitability between both groups of firms is associated with differences in investment quality. Finally, it shows that investors do not fully understand the role of financial constraints on the relation between investment and future profitability, since the investment of financially constrained firms is associated with higher one-year ahead abnormal returns than the investment of flexible firms. Moreover, for financially constrained firms, large levels of investment are not associated with negative abnormal returns, suggesting that the negative relation between corporate investment and future abnormal stock returns documented in previous research is not general to the entire cross-section of firms.
Book Synopsis On Stock Market Returns and Returns on Investment by : Fernando Restoy
Download or read book On Stock Market Returns and Returns on Investment written by Fernando Restoy and published by . This book was released on 1993 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Firms as Buyers of Last Resort by : Jiang Wang
Download or read book Firms as Buyers of Last Resort written by Jiang Wang and published by . This book was released on 2011 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model to explore the effects of firms being buyers of last resort on stock returns and liquidity. Those with more ability to repurchase shares when prices drop far below fundamental value (less financially constrained ones) should have lower short horizon relative to long-horizon return variance and more positively skewed returns than other firms. Using standard proxies for financing constraints such as past repurchases and firm age, we find support for both of these predicted relations in the U.S. stock market. Consistent with our theory, these relations are stronger in the U.S. after 1982 when regulatory reforms lowered the legal cost of conducting repurchases; and among the ten largest stock markets in the world, they are stronger in countries where share repurchases are legally easier to execute. Using data on bid-ask spreads and price impact costs, we also find some support for the proposition that firm intervention makes it less risky for other traders to provide liquidity for its stock.
Book Synopsis Financial Constraints and Dividend Policy by : Robert W. Faff
Download or read book Financial Constraints and Dividend Policy written by Robert W. Faff and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of US listed firms over the 1989-2012 period, we find that financially constrained dividend-increasing firms experience superior short-run abnormal stock returns, but suffer worse operating performance compared to similar unconstrained firms. More specifically, constrained firms in more competitive industries realize poorer long-run and operating performance. Likewise, constrained firms that increase dividends during the financial crisis also deliver inferior post-dividend-increase long-run return than do unconstrained firms. We also find evidence that constrained firms show worse stock market reaction to new equity issue announcements following dividend increase, but display a positive market response if they potentially have high investment growth opportunities. Our results are robust to alternative financial constraint proxies and abnormal return measures.
