Similar Search Results

CAPM for estimating the cost of equity capital: Interpreting the empirical evidence

Da, Zhi; Guo, Re-Jin; Jagannathan, Ravi - In: Journal of Financial Economics 103 (2012) 1, pp. 204-220

We argue that the empirical evidence against the capital asset pricing model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Because stocks are backed not only by projects in place, but also by the...

Persistent link: https://www.econbiz.de/10010702354

The impact of investor protection law on corporate policy and performance: Evidence from the blue sky laws

Agrawal, Ashwini K. - In: Journal of Financial Economics 107 (2013) 2, pp. 417-435

Recent studies have debated the impact of investor protection law on corporate behavior and value. I exploit the staggered passage of state securities fraud statutes (“blue sky laws”) in the United States to estimate the causal effects of investor protection law on firm financing decisions...

Persistent link: https://www.econbiz.de/10011039263

Payout taxes and the allocation of investment

Becker, Bo; Jacob, Marcus; Jacob, Martin - In: Journal of Financial Economics 107 (2013) 1, pp. 1-24

When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). If there are no perfect substitutes for equity finance, payout taxes may therefore have an effect on the investment of firms. High taxes will favor investment by firms who can...

Persistent link: https://www.econbiz.de/10011039284

Refinancing, profitability, and capital structure

Danis, András; Rettl, Daniel A.; Whited, Toni M. - In: Journal of Financial Economics 114 (2014) 3, pp. 424-443

We revisit the well-established puzzle that leverage is negatively correlated with measures of profitability. In … between profitability and leverage is positive. At other times, it is negative. These results are consistent with dynamic … profitability in the quarters prior to rebalancing events match the patterns predicted by these models. Our results are not driven …

Persistent link: https://www.econbiz.de/10011076292

The European Union, the Euro, and equity market integration

Bekaert, Geert; Harvey, Campbell R.; Lundblad, Christian T. - In: Journal of Financial Economics 109 (2013) 3, pp. 583-603

We use industry valuation differentials across European countries to study the impact of membership in the European Union as well as the Eurozone on both economic and financial integration. In integrated markets, discount rates and expected growth opportunities should be similar within one...

Persistent link: https://www.econbiz.de/10010681720

Inventory investment and the cost of capital

Jones, Christopher S.; Tuzel, Selale - In: Journal of Financial Economics 107 (2013) 3, pp. 557-579

We examine the relation between inventory investment and the cost of capital in the time series and the cross section. We find consistent evidence that risk premiums, rather than real interest rates, are strongly negatively related to future inventory growth at the aggregate, industry, and firm...

Persistent link: https://www.econbiz.de/10010635948

Learning from peers' stock prices and corporate investment

Foucault, Thierry; Fresard, Laurent - In: Journal of Financial Economics 111 (2014) 3, pp. 554-577

Peers' valuation matters for firms' investment: a one standard deviation increase in peers' valuation is associated with a 5.9% increase in corporate investment. This association is stronger when a firm's stock price informativeness is lower or when its managers appear less informed. Also, the...

Persistent link: https://www.econbiz.de/10010743553

Trading frenzies and their impact on real investment

Goldstein, Itay; Ozdenoren, Emre; Yuan, Kathy - In: Journal of Financial Economics 109 (2013) 2, pp. 566-582

We study a model in which a capital provider learns from the price of a firm's security in deciding how much capital to provide for new investment. This feedback effect from the financial market to the investment decision gives rise to trading frenzies, in which speculators all wish to trade...

Persistent link: https://www.econbiz.de/10010678706

Collateral and capital structure

Rampini, Adriano A.; Viswanathan, S. - In: Journal of Financial Economics 109 (2013) 2, pp. 466-492

We develop a dynamic model of investment, capital structure, leasing, and risk management based on firms' need to collateralize promises to pay with tangible assets. Both financing and risk management involve promises to pay subject to collateral constraints. Leasing is strongly collateralized...

Persistent link: https://www.econbiz.de/10010678713

Externalities of public firm presence: Evidence from private firms' investment decisions

Badertscher, Brad; Shroff, Nemit; White, Hal D. - In: Journal of Financial Economics 109 (2013) 3, pp. 682-706

Public firms provide a large amount of information through their disclosures. In addition, information intermediaries publicly analyze, discuss, and disseminate these disclosures. Thus, greater public firm presence in an industry should reduce uncertainty in that industry. Following the...

Persistent link: https://www.econbiz.de/10010681717