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Article: Inflexibility and Stock Returns

TitleInflexibility and Stock Returns
Authors
Gu, LHackbarth, DJohnson, T
Issue Date2018
PublisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/
Citation
The Review of Financial Studies, 2018, v. 31 n. 1, p. 278–321 How to Cite?
DOI: http://dx.doi.org/10.1093/rfs/hhx092
AbstractInvestment-based asset pricing research highlights the role of irreversibility as a determinant of firms' risk and expected return. In a neoclassical model of a firm with costly scale adjustment options, we show that the effect of scale flexibility (i.e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk increases with operating leverage for inflexible firms, but decreases for flexible firms. Guided by theory, we construct easily reproducible proxies for inflexibility and operating leverage. Empirical tests provide support for the predicted interaction of these characteristics in stock returns and risk.
Persistent Identifierhttp://hdl.handle.net/10722/245364
ISSN
0893-9454
2021 Impact Factor: 8.414
2020 SCImago Journal Rankings: 12.800
ISI Accession Number ID
WOS:000428741900008

 

DC FieldValueLanguage
dc.contributor.authorGu, L-
dc.contributor.authorHackbarth, D-
dc.contributor.authorJohnson, T-
dc.date.accessioned2017-09-18T02:09:19Z-
dc.date.available2017-09-18T02:09:19Z-
dc.date.issued2018-
dc.identifier.citationThe Review of Financial Studies, 2018, v. 31 n. 1, p. 278–321-
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/245364-
dc.description.abstractInvestment-based asset pricing research highlights the role of irreversibility as a determinant of firms' risk and expected return. In a neoclassical model of a firm with costly scale adjustment options, we show that the effect of scale flexibility (i.e., contraction and expansion options) is to determine the relation between risk and operating leverage: risk increases with operating leverage for inflexible firms, but decreases for flexible firms. Guided by theory, we construct easily reproducible proxies for inflexibility and operating leverage. Empirical tests provide support for the predicted interaction of these characteristics in stock returns and risk.-
dc.languageeng-
dc.publisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/-
dc.relation.ispartofThe Review of Financial Studies-
dc.rightsPre-print: Journal Title] ©: [year] [owner as specified on the article] Published by Oxford University Press [on behalf of xxxxxx]. All rights reserved. Pre-print (Once an article is published, preprint notice should be amended to): This is an electronic version of an article published in [include the complete citation information for the final version of the Article as published in the print edition of the Journal.] Post-print: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here]. -
dc.titleInflexibility and Stock Returns-
dc.typeArticle-
dc.identifier.emailGu, L: oliviagu@hku.hk-
dc.identifier.authorityGu, L=rp01802-
dc.identifier.doi10.1093/rfs/hhx092-
dc.identifier.scopuseid_2-s2.0-85042461581-
dc.identifier.hkuros276047-
dc.identifier.volume31-
dc.identifier.issue1-
dc.identifier.spage278–321-
dc.identifier.epage278–321-
dc.identifier.isiWOS:000428741900008-
dc.publisher.placeUnited Kingdom-
dc.identifier.issnl0893-9454-

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