Financial Constraints and Stock Returns

Posted: 19 Jul 2000

See all articles by Owen A. Lamont

Owen A. Lamont

Harvard University - Department of Economics

Christopher Polk

London School of Economics

Jesus Saa-Requejo

Vega Asset Management LLC

Multiple version iconThere are 3 versions of this paper

Abstract

We test whether the impact of financial constraints on firm value is observable in asset returns. We form portfolios of firms based on observable characteristics related to financial constraints, and test for common variation in the stock returns of these firms. Financially constrained firms' stock returns move together over time. Constrained firms have low returns in our sample of growing manufacturing firms in 1968-1997. We find little evidence that the relative performance of financially constrained firms reflects monetary policy, credit conditions, or business cycles.

JEL Classification: G12, G32, E44

Suggested Citation

Lamont, Owen A. and Polk, Christopher and Saa-Requejo, Jesus, Financial Constraints and Stock Returns. Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=216648

Owen A. Lamont (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Christopher Polk

London School of Economics ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/polk/

Jesus Saa-Requejo

Vega Asset Management LLC ( email )

Edificio Alfredo Mahou planta 23
Plaza Manuel Gomez Moreno 2
Madrid
Spain

Register to save articles to
your library

Register

Paper statistics

Abstract Views
850
PlumX Metrics