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Financially constrained stock returns

We study the effect of financial constraints on risk and expected returns by extending the investment-based asset pricing framework to incorporate retained earnings, debt, costly equity, and collateral constraints on debt capacity. Quantitative results show that more financially constrained firms are riskier and earn higher expected stock returns than less financially constrained firms. Intuitively, by preventing firms from financing all desired investments, collateral constraints restrict the flexibility of firms in smoothing dividend streams in the face of aggregate shocks. The inflexibility mechanism also gives rise to a convex relation between market leverage and expected stock returns.Printed journal

Ketersediaan

Call NumberLocationAvailable
PSB lt.dasar - Pascasarjana1
Penerbit The American Finance Association.,
Edisi -
Subjek Leverage
Dividends
Impact analysis
studies
Expected returns
ISBN/ISSN 221082
Klasifikasi -
Deskripsi Fisik -
Info Detail Spesifik -
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