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

Yuan Huang, F. Y.Eric C. Lam*, K. C. John Wei

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

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.

Original languageEnglish
Pages (from-to)69-81
Number of pages13
JournalJournal of Banking and Finance
Volume49
DOIs
Publication statusPublished - 1 Oct 2014

Scopus Subject Areas

  • Finance
  • Economics and Econometrics

User-Defined Keywords

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

Fingerprint

Dive into the research topics of 'The q-theory explanation for the external financing effect: New evidence'. Together they form a unique fingerprint.

Cite this