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

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

Journal of Banking & Finance, 2014, vol. 49, issue C, 69-81

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; Total profitability; q-Theory of investment; R&D; Total asset growth (search for similar items in EconPapers)
JEL-codes: G14 G31 G32 M41 M42 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:49:y:2014:i:c:p:69-81

DOI: 10.1016/j.jbankfin.2014.08.010

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