The relation between corporate financing activities, analysts’ forecasts and stock returns

Mark T. Bradshaw; Scott A. Richardson; Richard G. Sloan

doi:10.1016/j.jacceco.2006.03.004

Journal of Accounting and Economics Vol. 42 No. 1-2 2006

The relation between corporate financing activities, analysts’ forecasts and stock returns

Mark T. Bradshaw^1,2; Scott A. Richardson^3,4; Richard G. Sloan^5,6,7

¹ Boston College · ² Harvard University · ³ London Business School · ⁴ University of Pennsylvania · ⁵ University of Michigan–Ann Arbor · ⁶ Ross School · ⁷ University of Southern California

open access

Abstract

We develop a comprehensive and parsimonious measure of corporate financing activities and document a negative relation between this measure and both future stock returns and future profitability. The economic and statistical significance of our results is stronger than in previous research focusing on individual categories of corporate financing activities. To discriminate between risk versus misvaluation as explanations for this relation, we analyze the association between our measure of external financing and sell-side analysts’ forecasts. Consistent with the misvaluation explanation, our measure of external financing is positively related to overoptimism in analysts’ forecasts.

DOI: 10.1016/j.jacceco.2006.03.004
Volume: 42
Issue: 1-2
Pages: 53-85
Language: en
Sources: bibtex:phds-export.bib openalex crossref

The relation between corporate financing activities, analysts’ forecasts and stock returns

Abstract

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