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

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journal contribution
posted on 01.03.2011, 00:00 by Murillo Campello, Long Chen
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.

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Publisher Statement

The definitive version is available at DOI: 10.1111/j.1538-4616.2010.00326.x

Publisher

Wiley-Blackwell

Language

en_US

issn

0022-2879

Issue date

01/09/2010

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