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Evaluating the Effect of External Financing Constraints on Expected Stock Returns of Non-financial Institutions: Evidence from Tehran Stock Market

Hashemzadeh, Zahra | 2017

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 49793 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Rahmati, Mohammad Hossein
  7. Abstract:
  8. The paper aims to investigate the importance of firms’ financial constraints for pricing equity in Iran. We study the impact of financial constraints of non-financial firms on their stock returns using a sample of 241 manufacturing firms listed in Tehran Stock Exchange (TSE) for the period of 2007 to 2014. We use a similar index as in Kaplan and Zingales (1997), KZ, to measure financial constraint. We examine whether financial constraint influences stock returns and can improve the explanatory power of the Fama and French three-factor asset pricing model. Our findings indicate that financial constraints can be considered as an important factor affecting asset returns. Cross-sectional regressions of returns on the financial constraint index and other firm characteristics show that constrained firms earn higher returns
  9. Keywords:
  10. Multifactor Model ; Asset Pricing Model ; Finance ; Capital Market ; Financial Constraint ; Excess Return ; Financial Constraint Indices

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