The Sensitivity Between Investment and Stock Price of the Firms Relying on Equity Issuance –By the Views of Capital Market Imperfections

• Main Authors: Li-Su,Su, 蘇麗夙
• Other Authors: Chia-Chung,Chan
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/62078346964642675146

碩士 === 東海大學 === 管理碩士學程在職進修專班 === 94 === Due to different costs of funds from internal or external sources under capital market imperfections, firms may face the problem of financial constraints. Over the past years, many empirical papers study the correlation between corporate investment and stock prices, but they show divergent explanations. In this paper, in addition to empirically re-testing the correlation between corporate investment and stock prices in the financial constraints, we also evaluate which factors of capital market imperfections affect such correlation. The results first show that firms with and without financial constraints appear similar sensitivities between corporate investment and stock prices, but the firms with more financial constraints and growth opportunity demonstrate higher sensitivities. In the mispricing, firms with financial constraints can’t use discretionary accruals to control profits, and thus capital markets do not significantly misprice their share prices. For the equity issuance, firms cannot rely on mispricing to significantly raise the sensitivity between investment and stock price, except those are un-financially constrained and have high growth opportunities.