Costly External Finance: Implications for Capital Markets Anomalies
---- Acknowledgements -----
We acknowledge helpful comments from Espen Eckbo, Gerald Garvey, Rick Green, Han Hong, Erica X. N. Li, Tyler Shumway, Neng Wang, Wei Xiong, Hong Yan (discussant), and other seminar participants at Hanqing Advanced Institute of Economics and Finance at Renmin University of China, the 2008 China International Conference in Finance, and the 2008 UBC PH&N Summer Finance Conference. Parts of this paper were completed while Lu Zhang was visiting Hanqing Advanced Institute of Economics and Finance at Renmin University of China, whose hospitality is gratefully acknowledged. An earlier version of the paper was circulated under the title "Costly external equity: Implications for asset pricing anomalies." We are responsible for all the remaining errors. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.