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, 18 3: 306-318. doi:10.1016/j.pacfin.2010.02.004

Author Chan, Howard
Chang, Xin
Faff, Robert
Wong, George
Title Financial constraints and stock returns - Evidence from Australia
Journal name Pacific Basin Finance Journal   Check publisher's open access policy
ISSN 0927-538X
Publication date 2010-06
Sub-type Article (original research)
DOI 10.1016/j.pacfin.2010.02.004
Volume 18
Issue 3
Start page 306
End page 318
Total pages 13
Place of publication Amsterdam, Netherlands
Publisher Elsevier BV, North-Holland
Language eng
Abstract Using multiple discriminant analysis, we construct an index that measures firms' external financial constraints in an Australian setting. We form portfolios of firms based on our financial constraints index and find that financially constrained firms earn lower return than their unconstrained counterparts. Moreover, stock returns of financially constrained firms are found to move together, indicating the potential existence of a financial constraints factor. Neither the variation nor the mean return of the constraints factor are well explained by existing asset pricing models, suggesting an independent role for our financial constraints factor in affecting stock returns. Copyright © 2010 Elsevier B.V. All rights reserved.
Keyword Financial constraints
Stock returns
Australian firms
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
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Created: Thu, 03 Mar 2011, 10:00:14 EST by Karen Morgan on behalf of UQ Business School