Research in Finance Series: Corporate Finance
Post by MSF Chula at Saturday, 26 August 2017 05:43 PM
Research in Finance Series: Corporate Finance
“Capital Market Access and Cash Flow Allocation during

the Financial Crisis”

by Professor Vidhan Goyal,
Hong Kong University of Science and Technology
What effect does stock market listing have on a firm’s investment, financing, and payout policies? We examine this question by evaluating investment, financing and payout responses of matched public and private firms to identical cash flow shocks during the 2007-2008 financial crisis. The crisis affected public and private firms differently – private firms faced greater financial constraints but were less exposed to valuation shocks. We find that both public and matched private firms heavily reduce their investments. However, public firms appear to use external debt financing to maintain payouts and repurchase stock. The results suggest that while stock market listing relaxes financial constraints, listing induces managers to cater to shareholders by smoothing dividends and shoring up stock through repurchases. We find that the pressure on public firms to be more stock-market focused is greater in market-based economies. By contrast, in bank-dependent economies, public firm behave more sensibly: they invest relatively more in fixed assets and engage less in smoothing dividends or repurchasing stock.
Research consulting hours at 3:45pm – 5:00pm
June 29 at 10:30am – 11:45am room 1107 Mahit
Last updated at Saturday, 26 August 2017 10:13 PM