Abstract
I add cash holdings into an investment-based model of stock returns. I motivate cash holdings via costly outside financing. The model shows a relation between stock returns and cash holdings and provides a structural foundation for estimating the value of cash holdings from regressions. I estimate the model at the firm level—a task notoriously difficult for q theoretic models. Adding cash into the model substantially improves model fit on average, and accounting for costly investment and financing help improve fit across firms.
| Original language | English |
|---|---|
| Number of pages | 26 |
| Journal | Accounting and Finance |
| DOIs | |
| Publication status | Accepted/In press - 25 Sep 2018 |
Keywords
- cash holdings
- q theory
- stock returns
Cite this
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Cash holdings, costly financing and the q theory of returns. / Galpin, Neal.
In: Accounting and Finance, 25.09.2018.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Cash holdings, costly financing and the q theory of returns
AU - Galpin, Neal
PY - 2018/9/25
Y1 - 2018/9/25
N2 - I add cash holdings into an investment-based model of stock returns. I motivate cash holdings via costly outside financing. The model shows a relation between stock returns and cash holdings and provides a structural foundation for estimating the value of cash holdings from regressions. I estimate the model at the firm level—a task notoriously difficult for q theoretic models. Adding cash into the model substantially improves model fit on average, and accounting for costly investment and financing help improve fit across firms.
AB - I add cash holdings into an investment-based model of stock returns. I motivate cash holdings via costly outside financing. The model shows a relation between stock returns and cash holdings and provides a structural foundation for estimating the value of cash holdings from regressions. I estimate the model at the firm level—a task notoriously difficult for q theoretic models. Adding cash into the model substantially improves model fit on average, and accounting for costly investment and financing help improve fit across firms.
KW - cash holdings
KW - q theory
KW - stock returns
UR - http://www.scopus.com/inward/record.url?scp=85053806248&partnerID=8YFLogxK
U2 - 10.1111/acfi.12406
DO - 10.1111/acfi.12406
M3 - Article
JO - Accounting and Finance
JF - Accounting and Finance
SN - 0810-5391
ER -