Abstract

http://ssrn.com/abstract=1923467
 
 

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Redefining Financial Constraints: A Text-Based Analysis


Gerard Hoberg


University of Southern California - FBE Dept

Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

October 23, 2014


Abstract:     
We score 10-K text to obtain annual measures of financial constraints, with separate measures for firms reporting equity and debt financing issues. Equity market constraints are associated with firms funding growth opportunities, have more severe consequences for the firm following large unexpected negative shocks, and are likely driven by informational asymmetries. A significant population of firms reporting equity market constraints also declare that they possess material undisclosed proprietary information. Constraints in the debt markets are distinct and are linked to covenant violations. Our measures outperform others used in the literature in predicting investment cuts following negative shocks.

Number of Pages in PDF File: 55

Keywords: Financial Constraints, Research and Development, Equity Issuance, Asymmetric Information, Debt Overhang, Debt Issuance, Text-Based Analysis

JEL Classification: G31, G32, D92

working papers series





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Date posted: September 8, 2011 ; Last revised: October 24, 2014

Suggested Citation

Hoberg, Gerard and Maksimovic, Vojislav, Redefining Financial Constraints: A Text-Based Analysis (October 23, 2014). Available at SSRN: http://ssrn.com/abstract=1923467 or http://dx.doi.org/10.2139/ssrn.1923467

Contact Information

Gerard Hoberg (Contact Author)
University of Southern California - FBE Dept ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~hoberg/
Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
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