Asset Pricing Implications of Non-Convex Adjustment Costs and Irreversibility of Investment

Cooper, Ilan

doi:10.2139/ssrn.423923

Cited by 94 publications

(96 citation statements)

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“…Many empirical studies (Gahlon & Gentry, 1982;Mandelker & Rhee, 1984;Huffman, 1989;Carlson et al 2004;Zhang, 2005;Cooper, 2006;Garcia & Jorgensen, 2010) use DOL and DFL to test their respective hypotheses in the context of developed markets. We take DOL and DFL to empirically examine their impact on firm value in the context of India since the structures of business organizations in the emerging or developing markets are different from those in developed markets (Sarkar et al 2008).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Association between Degree of Leverages and Firm Value

Gupta

Kumar²,

Verma³

2016

AJFA

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This study aims to empirically investigate the association between degree of leverages, operating and financial, and firm value in the context of India, one of big ten emerging markets (Garten, 1997). This study examines this association for 231 manufacturing firms listed in National Stock Exchange (NSE) in India over a period from 2001-2002 to 2010-2011. The independent variables, degrees of operating and financial leverage, and a market price-based dependent variable, called price-earnings ratio as a proxy of firm value, are taken to examine this relationship by using standard ordinary least square regression Asian Journal of Finance & Accounting ISSN 1946-052X 2016 ajfa.macrothink.org 213 models at the levels of individual firm and portfolio of firms. The findings of this study show a statistically significant negative relationship between firm value and degree of operating leverage and a statistically insignificant relationship between firm value and degree of financial leverage both at the levels of individual firm and portfolio of firms. Using the data from a country like India, one of fastest growing emerging markets in the world, this study provides an important insight on the effect of leverages on the firm value, the association between independent accounting variables and stock price-based dependent variable, to the practitioners, the scholars and the finance managers.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Association between Degree of Leverages and Firm Value

Gupta

Kumar²,

Verma³

2016

AJFA

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“…The article considers two types of shocks, where the large technological innovations are embodied in new vintages of the capital stock and generate a mechanism that makes consumption-based asset pricing more successful at lower frequencies. Recently, several articles have worked with these types of economies in an attempt to link stock returns to the book-to-market (B/M) ratio (Gourio 2004;Kogan 2004;Zhang 2005;Gala 2006;Cooper 2006). Their general idea is that firms with high B/M ratios are burdened with excess capital in bad times.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Hall (2001) and Zhang (2005), like this article, introduce costly reversibility through a piecewise quadratic adjustment cost function, which allows cutting capital to be costlier than expanding the capital stock through parameter asymmetry. Recently, several articles have studied the asset pricing implications of models with irreversible investment (Berk, Green, and Naik 1999;Gomes, Kogan, and Zhang 2003;Kogan 2004;Cooper 2006), which prohibit disinvestment completely.…”

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confidence: 99%

Corporate Real Estate Holdings and the Cross Section of Stock Returns

Tüzel

2009

SSRN Journal

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“…For example, Berk et al (1999), Gomes et al (2003), Carlson et al (2004), and Cooper (2006) show that the relative importance of assets-in-place and growth options varies over time as firms invest, leading to predictable changes in expected returns. When firms invest, their book values increase, but so typically do their fixed costs of production.…”

Section: Introductionmentioning

confidence: 99%

A note on operating leverage and expected rates of return

Guthrie

2011

Finance Research Letters

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Asset Pricing Implications of Non-Convex Adjustment Costs and Irreversibility of Investment

Cited by 94 publications

References 0 publications

Association between Degree of Leverages and Firm Value

Association between Degree of Leverages and Firm Value

Corporate Real Estate Holdings and the Cross Section of Stock Returns

A note on operating leverage and expected rates of return

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