External Financing, Growth and Stock Returns

European Financial Management, vol. 18, pp. 790-815, 2012

Posted: 17 Jul 2008 Last revised: 31 May 2017

See all articles by Gikas A. Hardouvelis

Gikas A. Hardouvelis

University of Piraeus; Centre for Economic Policy Research (CEPR)

George A. Papanastasopoulos

University of Piraeus - Department of Business Administration

Dimitrios D. Thomakos

University of Peloponnese - School of Management, Economics and Informatics; University of Bologna - Rimini Center for Economic Analysis (RCEA)

Tao Wang

City University of New York (CUNY) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2010

Abstract

In this paper we investigate the relation of the value/growth anomaly with the anomaly on corporate financing activities. We find that value/growth and external financing indicators could be related in capturing stock returns attributable to sales growth. However, external financing indicators could be incrementally informative since they also pick up stock returns associated with earnings quality. Portfolios that combine information from both these indicators generate significantly higher returns than those containing each individual indicator. It appears that the external financing anomaly is to some extent distinct from the value/growth anomaly, in that it may also reflect investors' misunderstanding of the effects of opportunistic earnings management.

Keywords: Corporate financing activities, value/growth, earnings quality, stock returns

JEL Classification: G10, M4

Suggested Citation

Hardouvelis, Gikas A. and Papanastasopoulos, George A. and Thomakos, Dimitrios D. and Wang, Tao, External Financing, Growth and Stock Returns (January 13, 2010). European Financial Management, vol. 18, pp. 790-815, 2012. Available at SSRN: https://ssrn.com/abstract=1162236

Gikas A. Hardouvelis

University of Piraeus ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
+32010 4142323 (Phone)
+3210 6724848 (Fax)

HOME PAGE: http://www.eurobank.gr

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

George A. Papanastasopoulos (Contact Author)

University of Piraeus - Department of Business Administration ( email )

80, KARAOLI & DIMITRIOU,PIRAEUS
Piraeus, 18534
Greece

Dimitrios D. Thomakos

University of Peloponnese - School of Management, Economics and Informatics ( email )

Department of Economics
22100 Tripolis
Greece
+30 2710 230139 (Fax)

HOME PAGE: http://es.uop.gr/

University of Bologna - Rimini Center for Economic Analysis (RCEA)

Via Patara, 3
Rimini (RN), RN 47900
Italy

Tao Wang

City University of New York (CUNY) - Department of Economics ( email )

65-30 Kissena Blvd
Flushing, NY 11367-1597
United States

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