Off-Balance-Sheet Assets, Financial Leverage, and Expected Stock Returns

This paper examines the cross-sectional relation between leverage and future stock returns. Prior research documents a puzzling negative correlation. We show that it is largely caused by firms' use of internal financing when having significant off-balance-sheet operating assets due to conservative accounting. Firms with high cost of external equity financing thus can have low leverage, creating a negative correlation between leverage and stock returns. In particular, firms with no debt contribute significantly to this phenomenon

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Year of publication:	2020
Authors:	Zhang, Jasmine
Other Persons:	Zhang, Xiao-Jun (contributor)
Publisher:	[2020]: [S.l.] : SSRN
Subject:	Kapitalstruktur \| Capital structure \| Kapitaleinkommen \| Capital income \| Börsenkurs \| Share price \| Kapitalmarktrendite \| Capital market returns \| CAPM \| Theorie \| Theory

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