@article{e7d17a1816344556bcaabb41ecdad629,
title = "The q-theory explanation for the external financing effect: New evidence",
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.",
keywords = "Cross-section of stock returns, External financing, Q-Theory of investment, R&D, Total asset growth, Total profitability",
author = "Yuan Huang and Lam, {F. Y.Eric C.} and {John Wei}, {K. C.}",
note = "Funding Information: We appreciate the helpful comments and suggestions from Chau Kin Au-Yeung, Santiago Bazdresch, James Brown, Huili Chang, Zhihong Chen, Pengjie Gao, Vidhan Goyal, Xiaoquan Jiang, Jung-Ho Lai, Chen Lin, Laura Liu, Michelle Lowry, Qinghao Mao, Hyun-Seung Na, Issac Otchere, Baozhi Qu, Douglas Rolph, Roberto Steri, Aris Stouraitis, Garry Twite, Tom Vinaimont, James Wang, Xueping Wu, Haifeng You, Guochang Zhang, Shaojun Zhang, Hong Zou, seminar participants at the Hong Kong University of Science and Technology, the City University of Hong Kong, and conference participants at the 2013 Annual Meeting of the European Financial Management Association in Reading, the 2011 Annual Conference of the Multinational Finance Society in Rome, the 2010 Annual Meeting of the Financial Management Association in New York, the 2010 China International Conference in Finance in Beijing, the 2010 Asian Finance Association Conference in Hong Kong, the 2010 City University of Hong Kong International Conference on Corporate Finance and Financial Markets, the 2009 Annual Conference on Financial Economics and Accounting at Rutgers University, and the 2009 Conference on the Theories and Practices of Securities and Financial Markets at National Sun Yat-sen University, where this paper won the Best Research Award. We are particularly grateful for the constructive and insightful comments and suggestions from an anonymous referee and Ike Mathur (the editor). The authors also thank Alice Cheung for editorial assistance. John Wei acknowledges financial support in the form of a Research Infrastructure Grant from Hong Kong{\textquoteright}s Research Grants Council (RI/93/94.BM02). All remaining errors are ours. The previous version of the paper carried the title “The external financing anomaly beyond real investment and earnings management”. ",
year = "2014",
month = oct,
day = "1",
doi = "10.1016/j.jbankfin.2014.08.010",
language = "English",
volume = "49",
pages = "69--81",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
}