TY  - JOUR
AU  - Lamont,Owen
AU  - Polk,Christopher
AU  - Saa-Requejo,Jesus
TI  - Financial Constraints and Stock Returns
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6210
PY  - 1997
Y2  - October 1997
UR  - http://www.nber.org/papers/w6210
L1  - http://www.nber.org/papers/w6210.pdf
N1  - Author contact info:
Owen Lamont
Department of Economics
Harvard University
Cambridge MA 02138
E-Mail: owen.lamont@yale.edu

Christopher Polk
Department of Finance
London School of Economics
Houghton St.
London WC2A 2AE
UK
Tel: +44 (0)20 7849 4917
Fax: +44 (0)20 7852 3580
E-Mail: c.polk@lse.ac.uk
AB  - We test whether the impact of financial constraints on firm value is observable in asset" returns.  We form portfolios of firms based on observable characteristics related to financial" constraints, and test for common covariation in the stock returns of these firms.  Using several" different measures of financial constraints, we find that financially constrained firms' stock" returns move together over time.  This financial constraint factor in stock returns is related to not well explained by, other empirically identified factors in asset returns.  Constrained firms" have remarkably low returns in our sample period of 1968-1995, both unconditionally and in the" context of empirical asset pricing models.  Financial constraint returns help explain returns" following initial public offerings and dividend omissions.  We find only limited support for the" hypothesis that the relative performance of financially constrained firms reflects monetary" policy, credit conditions, and business cycles.
ER  -