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Article: Are Financial Constraints Priced? Evidence from Textual Analysis

TitleAre Financial Constraints Priced? Evidence from Textual Analysis
Authors
Issue Date2018
PublisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/
Citation
The Review of Financial Studies, 2018, v. 31 n. 7, p. 2693-2728 How to Cite?
AbstractWe construct novel measures of financial constraints using textual analysis of firms' annual reports and investigate their impact on stock returns. Our three measures capture access to equity markets, debt markets, and external financial markets in general. In all cases, constrained firms earn higher returns, which move together and cannot be explained by the Fama and French (2015) factor model. A trading strategy based on financial constraints is most profitable for large, liquid stocks. Our results are strongest when we consider debt constraints. A portfolio based on this measure earns an annualized risk-adjusted excess return of 6.5%.
Persistent Identifierhttp://hdl.handle.net/10722/261048
ISSN
2017 Impact Factor: 4.27
2015 SCImago Journal Rankings: 9.925
SSRN
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorBuehlmaier, M-
dc.contributor.authorWhited, TM-
dc.date.accessioned2018-09-14T08:51:34Z-
dc.date.available2018-09-14T08:51:34Z-
dc.date.issued2018-
dc.identifier.citationThe Review of Financial Studies, 2018, v. 31 n. 7, p. 2693-2728-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/261048-
dc.description.abstractWe construct novel measures of financial constraints using textual analysis of firms' annual reports and investigate their impact on stock returns. Our three measures capture access to equity markets, debt markets, and external financial markets in general. In all cases, constrained firms earn higher returns, which move together and cannot be explained by the Fama and French (2015) factor model. A trading strategy based on financial constraints is most profitable for large, liquid stocks. Our results are strongest when we consider debt constraints. A portfolio based on this measure earns an annualized risk-adjusted excess return of 6.5%.-
dc.languageeng-
dc.publisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/-
dc.relation.ispartofThe Review of Financial Studies-
dc.rightsThis is an electronic version of an article published in The Review of Financial Studies, 2018, v. 31 n. 7, p. 2693-2728-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleAre Financial Constraints Priced? Evidence from Textual Analysis-
dc.typeArticle-
dc.identifier.emailBuehlmaier, M: buehl@hku.hk-
dc.identifier.authorityBuehlmaier, M=rp01305-
dc.description.naturepreprint-
dc.identifier.doi10.1093/rfs/hhy007-
dc.identifier.hkuros290255-
dc.identifier.volume31-
dc.identifier.issue7-
dc.identifier.spage2693-
dc.identifier.epage2728-
dc.identifier.isiWOS:000451283500007-
dc.publisher.placeUnited Kingdom-
dc.identifier.ssrn2435116-

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