The equity-financing channel, the catering channel, and corporate investment: International evidence
Publication Type
Conference Paper
Publication Date
4-2017
Abstract
We examine how stock market mispricing affectscorporate investment in an international setting. We find that investment ismore sensitive to stock prices for equity-dependent firms than for non-equity-dependentfirms in our international sample. Investment is also more sensitive to stockprices for firms located in countries with more developed capital markets (i.e.,lower costs of raising capital), higher share turnover (i.e., shortershareholder horizons), and higher R&D intensity (i.e., more opaque assets). More importantly, the positive relation between equitydependence and the sensitivity of investment to stock prices is more pronouncedfor firms located in these same countries. These findings are consistent withthe equity-financing hypothesis and the catering hypothesis on corporateinvestment proposed by Baker et al. (2003) and Polk and Sapienza (2009),respectively.
Keywords
Equity-financing channel, Catering channel, Corporate investment
Discipline
Accounting | Finance and Financial Management
Research Areas
Finance; Financial Intermediation and Information
Publication
8th Financial Markets and Corporate Governance conference, Wellington, April 20-21
Publisher
Singapore Management University, SMU Economics and Statistics Working Paper Series, Paper No. 04-2018
City or Country
Wellington
Citation
KUSNADI, Yuanto and WEI, K.C. John.
The equity-financing channel, the catering channel, and corporate investment: International evidence. (2017). 8th Financial Markets and Corporate Governance conference, Wellington, April 20-21.
Available at: https://ink.library.smu.edu.sg/soa_research/1667
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.