Net stock issuance anomaly and cash flow explanation: A research note

Alan Meng Li, Dharmendra Naidu, Farshid Navissi and Kumari Ranjeeni
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Alan Meng Li: Independent, Australia
Kumari Ranjeeni: Department of Accounting, Monash Business School, Caulfield East, Australia

Australian Journal of Management, 2018, vol. 43, issue 2, 286-304

Abstract: Prior studies show that net stock issuance is negatively associated with the cross section of future stock returns, reflecting a market anomaly. Our study provides empirical evidence on whether cash flow can mitigate such anomaly. Consistent with prior research, we initially provide evidence of the anomaly in our sample and that the anomaly persists in the presence of cash flow. We then decompose net stock issuance into stock issues and stock repurchases and find that the anomaly is only driven by stock issues but not stock repurchases and that the stock issues’ anomaly persists even in the presence of cash flow. JEL Classification: G12, G14

Keywords: Cash flow; net stock issuance anomaly; stock issue; stock repurchase (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:43:y:2018:i:2:p:286-304

DOI: 10.1177/0312896217717306

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