The Q-theory Explanation for the External Financing Effect PDF Download
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Author: Yuan Huang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Several studies document a robust negative association between net external financing and average stock returns, which is referred to as the external financing effect. Using total asset growth as a comprehensive measure of overall corporate investment and total profitability gross of Ramp;D expenditures as a measure of true economic profitability, we provide new evidence in support of the q-theory explanation for the external financing effect. We also test the market timing explanation for the external financing effectbut fail to document supportive evidence.
Author: Yuan Huang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Several studies document a robust negative association between net external financing and average stock returns, which is referred to as the external financing effect. Using total asset growth as a comprehensive measure of overall corporate investment and total profitability gross of Ramp;D expenditures as a measure of true economic profitability, we provide new evidence in support of the q-theory explanation for the external financing effect. We also test the market timing explanation for the external financing effectbut fail to document supportive evidence.
Author: Paul Butzen
Publisher: Edward Elgar Publishing
ISBN: 9781781956335
Category : Business & Economics
Languages : en
Pages : 354
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Book Description
This book provides coherent theoretical and empirical analysis of firms’ investment and financing decisions. It assesses the role of uncertainty, financial imperfections, corporate governance and taxation. Evidence is obtained using several unique and high quality microeconomic data-sets, which explore features seldom addressed.
Author: Yao Yao
Publisher:
ISBN: 9781361315545
Category :
Languages : en
Pages :
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Book Description
This dissertation, "Essays on the Investment Effect" by Yao, Yao, 姚瑶, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: The thesis consists of two essays on the investment effect. The first essay is an international examination of the investment effect, and the second essay explores the rationale behind the investment effect based on U.S. data. A growing body of finance literature has documented an investment effect that firms making larger investments earn lower future stock returns. While the negative relation between corporate investments and future stock returns is well accepted, it is in a great debate for why an investment effect exists. Two major hypotheses are proposed to account for the investment effect, mispricing and rational pricing. The mispricing hypothesis focuses on market participants' irrational behavior, including managerial overinvestment and investors' extrapolation of past firm performance. The rational pricing hypothesis, however, centers on examinations of the q theory. Under the q theory, the net present value of potential projects can be high if either the future marginal productivity is high or the future discount rate is low. As a result, for a given level of future profitability, firms making large (small) investments are likely to be those with low (high) discount rates. This predicts low (high) stock returns following large (small) capital investments. The first essay tests the q theory explanation for the investment effect using international data. I show that the investment effect exists across international markets and differs substantially across countries. I find a stronger investment effect in countries with better corporate governance, lower limits to arbitrage, and more developed equity markets. I construct a composite Q index, based on corporate governance, limits to arbitrage and market development, to separate countries with a strong investment effect from the rest. The empirical results are consistent with the q theory explanation for the investment effect. The second essay investigates the relation between the investment effect and intangible returns, as well as external financing, in the U.S. market. Extending the model in Daniel and Titman (2006), I operationalize an empirical design of log-linear decomposition of the book-to-market ratio. Using a three-period empirical model, I examine the relations among intangible returns in period one, real investments and external financing in period two, and stock returns in period three. The empirical evidence suggests no additional explaining power of investments for future stock returns, when contemporaneous external financing and prior intangible returns are controlled for. The abnormal return patterns associated with real investments documented in prior studies are consistent with, and part of, the broader return pattern that characterizes the value/growth anomaly. I show that these findings are consistent with the q theory, but inconsistent with the mispricing story. DOI: 10.5353/th_b5043432 Subjects: Investments
Author: Christian Gouriéroux
Publisher: OUP Oxford
ISBN: 019152509X
Category : Business & Economics
Languages : en
Pages : 190
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Book Description
This book introduces a new generation of statistical econometrics. After linear models leading to analytical expressions for estimators, and non-linear models using numerical optimization algorithms, the availability of high- speed computing has enabled econometricians to consider econometric models without simple analytical expressions. The previous difficulties presented by the presence of integrals of large dimensions in the probability density functions or in the moments can be circumvented by a simulation-based approach. After a brief survey of classical parametric and semi-parametric non-linear estimation methods and a description of problems in which criterion functions contain integrals, the authors present a general form of the model where it is possible to simulate the observations. They then move to calibration problems and the simulated analogue of the method of moments, before considering simulated versions of maximum likelihood, pseudo-maximum likelihood, or non-linear least squares. The general principle of indirect inference is presented and is then applied to limited dependent variable models and to financial series.
Author: Ilya A. Strebulaev
Publisher: Now Pub
ISBN: 9781601985804
Category : Business & Economics
Languages : en
Pages : 174
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Book Description
The goals of this monograph are to explain the models and techniques and make it more accessible, introduce the main strands of this literature, and explain how dynamic models can be taken to the data and estimated, providing a guide to 3 methodologies: generalized method of moments, simulated method of moments, and maximum simulated likelihood.
Author: R. Glenn Hubbard
Publisher: University of Chicago Press
ISBN: 0226355942
Category : Business & Economics
Languages : en
Pages : 354
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Book Description
In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Author: Jean Tirole
Publisher: Princeton University Press
ISBN: 1400830222
Category : Business & Economics
Languages : en
Pages : 657
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Book Description
"Magnificent."—The Economist From the Nobel Prize–winning economist, a groundbreaking and comprehensive account of corporate finance Recent decades have seen great theoretical and empirical advances in the field of corporate finance. Whereas once the subject addressed mainly the financing of corporations—equity, debt, and valuation—today it also embraces crucial issues of governance, liquidity, risk management, relationships between banks and corporations, and the macroeconomic impact of corporations. However, this progress has left in its wake a jumbled array of concepts and models that students are often hard put to make sense of. Here, one of the world's leading economists offers a lucid, unified, and comprehensive introduction to modern corporate finance theory. Jean Tirole builds his landmark book around a single model, using an incentive or contract theory approach. Filling a major gap in the field, The Theory of Corporate Finance is an indispensable resource for graduate and advanced undergraduate students as well as researchers of corporate finance, industrial organization, political economy, development, and macroeconomics. Tirole conveys the organizing principles that structure the analysis of today's key management and public policy issues, such as the reform of corporate governance and auditing; the role of private equity, financial markets, and takeovers; the efficient determination of leverage, dividends, liquidity, and risk management; and the design of managerial incentive packages. He weaves empirical studies into the book's theoretical analysis. And he places the corporation in its broader environment, both microeconomic and macroeconomic, and examines the two-way interaction between the corporate environment and institutions. Setting a new milestone in the field, The Theory of Corporate Finance will be the authoritative text for years to come.
Author: Gilles Hilary
Publisher: Edward Elgar Publishing
ISBN: 1802204172
Category : Business & Economics
Languages : en
Pages : 463
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Book Description
This accessible Handbook provides an essential entry point for those with an interest in the increasingly complex subject of financial decision making. It sheds light on new paradigms in society and the ways that new tools from private actors have affected financial decision making. Covering a broad range of key topics in the area, leading researchers summarize the state-of-the-art in their respective areas of expertise, delineating their projections for the future.
Author: Mr.Vadim Khramov
Publisher: International Monetary Fund
ISBN: 1475502877
Category : Business & Economics
Languages : en
Pages : 28
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Book Description
This paper uses the financial crisis of 2008 as a natural experiment to demonstrate that when measuring investment-cash flow sensitivity, the value of a firm's assets that can be used as collateral should be taken into account. Using panel data on U.S. firms from 1990 to 2011, it was found that the share of physical capital in assets has a strong influence on investment-cash flow sensitivity, which decreased substantially after the crisis when banks changed their expectations about the value of assets on firms' balance sheets. This paper deepens our understanding of firms' investment behavior.
Author: Xingyun Peng
Publisher: World Scientific
ISBN: 1938134338
Category : Business & Economics
Languages : en
Pages : 707
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Book Description
China is now the second largest economy in the world, with an increasingly efficient and open financial system. Many firms, agents and financial institutions have realized the potential in making money in China. Financial Theory: Perspectives from China serves as a timely textbook providing a unique introduction to economics theory, with a focus on money, banking and financial systems, through examples based mainly on China's financial practices. It contains up-to-date developments of theory and practices, as well as various interesting stories on China's financial system. Topics such as financial institutions, capital markets, debt securities markets, mutual fund markets, money markets, foreign exchange and financial derivative markets are discussed in depth. Financial theories are supplemented with illustrations from China's money supply mechanism and monetary policy system, China's financial regulatory and supervision system, as well as China's financial system and how it has liberalized and opened up to the rest of the world.Readers will find detailed examinations of financial theories, exemplified and reinforced by the inclusion of different financial cases and phenomena, each intriguing in their own right. This book provides readers with a deeper understanding of China's financial practices, providing vital knowledge for investing in China and engaging businesses there. Undergraduate students in economics and finance and those keen on becoming a player in China's financial markets will no doubt find this volume useful and necessary.
