Cash holdings, costly financing and the q theory of returns

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

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 languageEnglish
Number of pages26
JournalAccounting and Finance
DOIs
Publication statusAccepted/In press - 25 Sep 2018

Keywords

  • cash holdings
  • q theory
  • stock returns

Cite this

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title = "Cash holdings, costly financing and the q theory of returns",
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.",
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author = "Neal Galpin",
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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 journalArticleResearchpeer-review

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