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Author: Owen A. Lamont Publisher: ISBN: Category : Corporations Languages : en Pages : 68
Book Description
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
Author: Owen A. Lamont Publisher: ISBN: Category : Corporations Languages : en Pages : 68
Book Description
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
Author: Owen A. Lamont Publisher: ISBN: Category : Languages : en Pages : 54
Book Description
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 variation in the stock returns of these firms. Financially constrained firms? stock returns move together over time. Constrained firms have low returns in our sample of growing manufacturing firms in 1968-1997. We find little evidence that the relative performance of financially constrained firms reflects monetary policy, credit conditions, or business cycles.
Author: H. Chan Publisher: ISBN: Category : Languages : en Pages : 30
Book Description
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.
Author: Dongmei Li Publisher: ISBN: 9781109985634 Category : Languages : en Pages : 57
Book Description
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.
Author: Xiafei Li Publisher: ISBN: Category : Languages : en Pages : 45
Book Description
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.
Author: Jaehoon Hahn Publisher: ISBN: Category : Languages : en Pages : 43
Book Description
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.
Author: Murillo Campello Publisher: ISBN: Category : Languages : en Pages : 22
Book Description
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.
Author: Mohanaraman Gopalan Publisher: ISBN: Category : Languages : en Pages : 44
Book Description
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.
Author: Owen A. Lamont
Author: Owen A. Lamont
Author: Owen A. Lamont
Author: H. Chan
Author: Dongmei Li
Author: Xiafei Li
Author: Jaehoon Hahn
Author: Murillo Campello
Author: Hui Han
Author: Mohanaraman Gopalan
Author: Nikolaos Balafas