Abstract

http://ssrn.com/abstract=1923467
 
 

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Redefining Financial Constraints: A Text-Based Analysis


Gerard Hoberg


University of Maryland - Department of Finance

Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

July 9, 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 have more severe consequences for the firm following exogenous negative shocks, are associated with firms funding growth opportunities, 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 likely driven by factors relating to debt overhang. Our measures outperform others used in the literature in predicting investment cuts following exogenous shocks.

Number of Pages in PDF File: 59

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: August 1, 2014

Suggested Citation

Hoberg, Gerard and Maksimovic, Vojislav, Redefining Financial Constraints: A Text-Based Analysis (July 9, 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 Maryland - Department of Finance ( email )
Robert H. Smith School of Business
Van Munching Hall
College Park, MD 20742
United States
HOME PAGE: http://www.rhsmith.umd.edu/finance/faculty/hoberg.aspx
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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Citations:  6
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