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Financial frictions and the reaction of stock prices to monetary policy shocks

Ozdagli, Ali - 2014 - This version: July 29, 2014

This paper reveals and tests a new theoretical implication of the credit channel of monetary policy: as financial frictions (monitoring or auditing costs) increase, the reaction of stock prices to monetary policy shocks decreases. Correspondingly, towards the end of the Enron accounting scandal,...

Persistent link: https://www.econbiz.de/10010395119

Bank Shocks, Financial Constraints, and Targeting Behavior : Evidence from Credit Supply Fluctuations

Shikimi, Masayo - 2019

This study investigates whether fluctuations in credit supply in a macroeconomy and a relational bank's financial condition affect the capital structure adjustment of firms. Using data for Japanese listed firms from 1988 to 2014, we find that firms adjust their capital structure slower during...

Persistent link: https://www.econbiz.de/10012890523

Leverage over the firm life cycle, firm growth, and aggregate fluctuations

Dinlersoz, Emin Murat; Kalemli-Ozcan, Sebnem; Hyatt, … - 2019

We study the leverage of U.S. firms over their life cycles and the connection between firm leverage, firm growth, and aggregate shocks. We construct a new dataset that combines private and public firms’ balance sheets with firm-level data from U.S. Census Bureau’s Longitudinal Business...

Persistent link: https://www.econbiz.de/10012063843

Dynamic Response of Equity Market Returns to Corporate Profit Growth Shock

Sum, Vichet - 2013

This study investigates how returns on the S&P 500 (SP) dynamically respond to the aggregate corporate profit growth … (CP) shock. The results from running the VAR model using quarterly data from 1951Q4 to 2012Q4 shows that returns on the SP … significantly and positively respond to the CP shock instantly in the first quarter and retreat back to the zero territory …

Persistent link: https://www.econbiz.de/10013078332

Equity capital, bankruptcy risk and the liquidity trap

Levintal, Oren - 2012

This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

Persistent link: https://www.econbiz.de/10009535806

The Role of Transitory Shocks in Equity Financing : Evidence from IPOs

Sohn, Sungbin - 2013

I use cointegration techniques to decompose stock market shocks into permanent and transitory shocks, building on the idea that transitory shocks should not have long-run effects on dividends and stock prices. The decomposed shocks improve on existing valuation measures by indicating the extent...

Persistent link: https://www.econbiz.de/10013091956

Firm cyclicality and financial frictions

Clymo, Alex; Rozsypal, Filip - 2023

Firms' sensitivities to business cycles differ by size and age. The differences are large: "young and small firms" are more cyclical than large firms, whereas "old and small" firms are closer to acyclical. A heterogeneous-firm model with heterogeneous returns to scale can replicate these...

Persistent link: https://www.econbiz.de/10014288919

Credit Supply Shocks, Financial Constraints and Investments for Small and Medium-sized Firms

Hetland, Ove Rein - 2018

In this paper, we find that reduced credit supply reduces firm investments in our sample of small private firms. The effect is strongest for the least financially constrained firms. We use a representative survey of identified Norwegian firms that is linked with financial, bank account and...

Persistent link: https://www.econbiz.de/10012940395

Asset Prices and Business Cycles with Financial Shocks

Nezafat, Pedram - 2015

We develop a production based asset pricing model with financially constrained firms to explain the observed high asset price volatility. Investment opportunities are scarce and firms face two shocks: classic productivity shocks and financial shocks that affect the tightness of the financial...

Persistent link: https://www.econbiz.de/10013039040

Housing market dynamics : on the contribution of income shocks and credit constraint

Ortalo-Magné, François; Rady, Sven - 2005

We propose a life-cycle model of the housing market with a property ladder and a credit constraint. We focus on equilibria which replicate the facts that credit constraints delay some households' first home purchase and force other households to buy a home smaller than they would like. The model...

Persistent link: https://www.econbiz.de/10010343962