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Title: The equity-financing channel, the catering channel, and corporate investment : international evidence
Authors: Kusnadi, Y
Wei, KCJ 
Keywords: Catering channel
Corporate investment
Equity-financing channel
Issue Date: 2017
Publisher: North-Holland
Source: Journal of corporate finance, 2017, v. 47, p. 236-252 How to cite?
Journal: Journal of corporate finance 
Abstract: We examine how equity mispricing affects corporate investment in an international setting. We find that investment is more sensitive to stock prices for equity-dependent firms than for non-equity-dependent firms in our international sample. Investment is also more sensitive to stock prices for firms located in countries with more developed capital markets (i.e., lower costs of raising capital), higher share turnover (i.e., shorter shareholder horizons), and higher R&D intensity (i.e., more opaque assets). More importantly, the positive relation between equity dependence and the sensitivity of investment to stock prices is more pronounced for firms located in these same countries. These findings are consistent with the equity-financing hypothesis and the catering hypothesis on corporate investment proposed by Baker et al. (2003) and Polk and Sapienza (2009), respectively.
ISSN: 0929-1199
DOI: 10.1016/j.jcorpfin.2017.09.021
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