Financial constraints and stock returns — evidence from Australia

Chan, Howard, Chang, Xin, Faff, Robert and Wong, George 2010, Financial constraints and stock returns — evidence from Australia, Pacific-Basin finance journal, vol. 18, no. 3, pp. 306-318, doi: 10.1016/j.pacfin.2010.02.004.

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Title Financial constraints and stock returns — evidence from Australia
Author(s) Chan, Howard
Chang, XinORCID iD for Chang, Xin
Faff, Robert
Wong, George
Journal name Pacific-Basin finance journal
Volume number 18
Issue number 3
Start page 306
End page 318
Total pages 13
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2010-06
ISSN 0927-538X
Keyword(s) financial constraints
stock returns
Australian firms
Summary Using multiple discriminant analysis, we construct an index thatmeasures firms' external financial constraints in an Australian setting.We form portfolios of firms based on our financial constraints index andfind that financially constrained firms earn lower return than theirunconstrained counterparts. Moreover, stock returns of financiallyconstrained firms are found to move together, indicating the potentialexistence of a financial constraints factor. Neither the variation nor themean return of the constraints factor are well explained by existing assetpricing models, suggesting an independent role for our financialconstraints factor in affecting stock returns.
Language eng
DOI 10.1016/j.pacfin.2010.02.004
Field of Research 150205 Investment and Risk Management
1502 Banking, Finance And Investment
1501 Accounting, Auditing And Accountability
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2010, Elsevier
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Document type: Journal Article
Collections: Faculty of Business and Law
Department of Finance
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