Financial inflexibility and the value peremium

Poulsen, Michael, Faff, Robert and Gray, Stephen (2013) Financial inflexibility and the value peremium. International Review of Finance, 13 3: 327-344. doi:10.1111/irfi.12010

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Author Poulsen, Michael
Faff, Robert
Gray, Stephen
Title Financial inflexibility and the value peremium
Journal name International Review of Finance   Check publisher's open access policy
ISSN 1369-412X
1468-2443
Publication date 2013-01-01
Year available 2013
Sub-type Article (original research)
DOI 10.1111/irfi.12010
Open Access Status Not Open Access
Volume 13
Issue 3
Start page 327
End page 344
Total pages 18
Place of publication Richmond, VIC Australia
Publisher Wiley-Blackwell Publishing Asia
Language eng
Formatted abstract
This paper tests whether and to what extent the value premium is induced by financial inflexibility. In this context, financial flexibility refers to the ability of a firm to alter investment expenditure to mitigate exogenous shocks, so as to generate a smooth dividend stream. Consistent with a literature that identifies three related sources of inflexibility, we create a composite inflexibility index, based on the proportion of fixed assets and measures of total leverage and financial constraints. A positive relation is documented between inflexibility and the book-to-market ratio, and between the returns of inflexible firms and value firms. However, the value premium retains explanatory power independent of inflexibility, suggesting that it is not a proxy for inflexibility alone
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Article first published online : 18 MAR 2013

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
UQ Business School Publications
 
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Citation counts: TR Web of Science Citation Count  Cited 3 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 3 times in Scopus Article | Citations
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Created: Thu, 31 Oct 2013, 00:30:15 EST by Karen Morgan on behalf of UQ Business School