http://dx.doi.org/10.1016/j.jbankfin.2014.08.010">
 

Document Type

Journal Article

Department/Unit

Department of Finance & Decision Sciences

Title

The q-theory explanation for the external financing effect: New evidence

Language

English

Abstract

© 2014 Elsevier B.V. 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 R&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 effect but fail to document supportive evidence.

Keywords

Cross-section of stock returns, External financing, Q-Theory of investment, R&D, Total asset growth, Total profitability

Publication Date

2014

Source Publication Title

Journal of Banking and Finance

Volume

49

Start Page

69

End Page

81

Publisher

Elsevier

ISSN (print)

03784266

ISSN (electronic)

18726372

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