Equity financing restrictions and the asset growth effect: International vs. Asian evidence
Loading...
Date
2019-10
Authors
Huang, Alan Guoming
Sun, Kevin Jialin
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
This paper investigates the driver of asset growth to explain the cross-country variation of the asset growth effect. We find that institutional restrictions on equity financing constrain firms' abilities to grow assets, and the degree of such restrictions is associated with the observed cross-country variations of the asset growth effect. Specifically, the asset growth effect is weaker in countries with more restrictions on stock issuance and buyback. In horserace tests, equity financing restrictions supersede legal system, stock market development, and information transparency in explaining the cross-country differences of the effect. We highlight our results through a comparison of two Asian countries—Korea and China—with the United States. Our results provide evidence that country financial regulations dampen certain sources of risks in asset prices.
Description
The final publication is available at Elsevier via https://doi.org/10.1016/j.pacfin.2018.08.007. © 2018. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Keywords
asset growth, stock returns, institutional restrictions, stock issuance, buyback, international markets, Asian, Korea, China