Understanding the Asset Growth Anomaly

@article{ODonovan2021UnderstandingTA,
  title={Understanding the Asset Growth Anomaly},
  author={James Roderick O'Donovan},
  journal={SPGMI: Compustat Fundamentals (Topic)},
  year={2021}
}
  • J. O'Donovan
  • Published 2021
  • SPGMI: Compustat Fundamentals (Topic)
Components of balance sheet asset growth driven by earnings management contributed to the asset growth anomaly in the past. These components of balance sheet asset growth are no longer related to returns and this has contributed to the disappearance of the asset growth anomaly. I provide evidence that the Sarbanes-Oxley Act reduced earnings management induced mispricing which I relate to the asset growth anomaly. More broadly, these findings point towards changes in the regulatory environment… Expand
View on SSRN
jamesodonovancom.files.wordpress.com
1 Citations
Background Citations
1

One Citation

Citation Type

Citation Type

Equity Financing Risk
We develop a model of equity financing risk (EFR; i.e., risky equity issuance costs) to study the joint effects of precautionary savings and research and development (R&D) investments on expected… Expand

References

SHOWING 1-10 OF 87 REFERENCES
Have Capital Market Anomalies Attenuated in the Recent Era of High Liquidity and Trading Activity
We examine whether the recent regime of increased liquidity and trading activity is associated with attenuation of prominent equity return anomalies due to increased arbitrage. We find that the… Expand
Dissecting the Asset Growth Anomaly
Studies have shown that firm asset growth predicts cross-sectional stock returns. Firms that shrink their assets earn superior returns while firms that substantially expand their assets incur poor… Expand
Asset Growth and the Cross-Section of Stock Returns
We test for firm-level asset investment effects in returns by examining the cross-sectional relation between firm asset growth and subsequent stock returns. Asset growth rates are strong predictors… Expand
The Balance Sheet as an Earnings Management Constraint
The balance sheet accumulates the effects of previous accounting choices, so the level of net assets partly reflects the extent of previous earnings management. We predict that managers' ability to… Expand
Limited Investor Attention and Stock Market Misreactions to Accounting Information
We provide a model in which a single psychological constraint, limited investor attention, explains both under- and over-reaction to different earnings components. Investor neglect of information in… Expand
Reexamining Growth Effects: Are All Types of Asset Growth the Same?
Asset growth has been shown to be negatively associated with future returns. Cooper, Gulen, and Schill (2008. Asset Growth and the Cross-Section of Stock Returns. Journal of Finance) argue that an… Expand
Multifactor Explanations of Asset Pricing Anomalies
Previous work shows that average returns on common stocks are related to firm characteristics like size, earnings/price, cash flow/price, book-to-market equity, past sales growth, long-term past… Expand
Empirical Evidence on Capital Investment, Growth Options, and Security Returns
Growth in capital expenditures conditions subsequent classification of firms to portfolios based on size and book-to-market ratios, as in the widely used Fama and French (1992, 1993) methods. Growth… Expand
The Use of Asset Growth in Empirical Asset Pricing Models
We show that the performance of the new factor models of Hou, Xue, and Zhang (2015) and Fama and French (2015) depends crucially on how their investment factor is constructed. Both models use growth… Expand
On the Scope and Drivers of the Asset Growth Effect
Recent papers have debated whether the negative correlation between measures of firm asset growth and subsequent returns is of little importance since it applies only to small firms, is justified as… Expand
...
1
2
3
4
5
...