Our paper provides evidence regarding the use of share repurchases as an earnings management mechanism in the presence of debt-financing constraints as well as the impact of these constraints on the use of accruals and other real earnings management techniques. We document that share repurchases...

N/A

Most of the papers in corporate finance use the investment-cash flow sensitivity as a key metric to gauge financing constraints. However, it has been documented in the theoretical and empirical literature that this metric is not necessarily symptomatic of financing constraints. In this paper, we...

Most of the bankruptcy prediction models developed so far have in common that they are based on quantitative data or more precisely financial ratios. However, useful information can be lost when disregarding soft information. In this work, we develop an automated content analysis technique to...

The poor stock price performance of firms that raise capital through seasoned equity offerings is one of the recent puzzles in financial literature. In this study we investigate whether pre-issue earnings management can explain these results for rights issues in Spain. Consistent with this...

Using a comprehensive data set of Portuguese manufacturing firms, we show that the firm size distribution is significantly right-skewed, evolving over time toward a log-normal distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple...

We formulate and estimate a structural model of firm investment behavior that specifies the exact channel through which financial frictions bite. The model also allows for the existence of both convex and non-convex costs to adjusting capital. Essentially, we move beyond simply testing and...

Cash balances of the firm follow a diffusion process, triggering liquidation when they cross a threshold value. Access to external funds is constrained. Shareholders are impatient. With these assumptions there is a precautionary motive for retaining earnings; the internal cost of funds and local...

This study utilizes a Post Keynesian theoretical model of investment behavior and firm-specific data from Brazilian firms to examine the role that sales, sales growth, financing costs, and internal cash flow play in the investment decisions of firms. In a broad sense, our results are similar to...

We incorporate costly external finance in a production based asset pricing model and investigate whether financing frictions are quantitatively important for pricing a cross-section of expected returns. We show that the common assumptions about the nature of the financing frictions are captured...