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Are Financial Constraints Priced? Evidence from Firm Fundamentals and Stock Returns

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Title: Are Financial Constraints Priced? Evidence from Firm Fundamentals and Stock Returns
Author(s): Campello, Murillo; Chen, Long
Subject(s): Financial constraints macroeconomic shocks systematic risk equity returns
Abstract: Using comprehensive firm- and aggregate-level data, this paper studies the real and financial implications of capital market imperfections. We first examine whether financially constrained firms' business fundamentals (capital spending and operating earnings) are more sensitive to macroeconomic movements than unconstrained firms' fundamentals. We then examine whether financial constraint "return factors" respond to macroeconomic shocks in tandem with the responses from business fundamentals. The evidence in this paper points to financial constraints affecting both fundamental quantities and asset returns.
Issue Date: 2010-09
Publisher: Wiley-Blackwell
Citation Info: Campello, M. & Chen, L. 2010. Are Financial Constraints Priced? Evidence from Firm Fundamentals and Stock Returns. Journal of Money Credit and Banking, 42(6): 1185-1198. DOI: 10.1111/j.1538-4616.2010.00326.x
Type: Article
Description: The definitive version is available at DOI: 10.1111/j.1538-4616.2010.00326.x
URI: http://hdl.handle.net/10027/7375
ISSN: 0022-2879
Date Available in INDIGO: 2011-03-01
 

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