Profitability, asset investment, and aggregate stock returns

Chue, Timothy K.; Xu, Jin

doi:10.1016/j.jbankfin.2022.106597

Cited by 7 publications

(3 citation statements)

References 49 publications

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“…The return on assets is the ratio of profits to average assets, which is an index that reflects the comprehensive utilization effect of assets. The higher the return on assets, the higher the utilization efficiency of assets, the stronger the profitability of the enterprise, and the higher the level of operations and management, which can achieve good results in increasing income and saving funds [60]. Therefore, return on assets reflects the level of enterprise management and the implementation of the system of responsibilities.…”

Section: Heterogeneity Analysismentioning

confidence: 99%

Environmental Credit Constraints and the Enterprise Choice of Environmental Protection Behavior

Yan,

Xiang,

et al. 2023

Sustainability

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Choosing appropriate environmental protection strategies is important in improving enterprises’ economic and environmental performance. Based on the data of A-share listed enterprises from 2009 to 2019 in China, this paper uses the difference-in-differences model to identify the effects of environmental credit constraints on the enterprise choice of environmental protection behavior. We find that environmental credit constraints motivate some enterprises to choose active environmental behavior due to the incentive effect of environmental credit constraints on R&D investments. However, some enterprises may adopt evasive strategies because environmental credit constraints increase production costs and debt. State-owned enterprises prefer active environmental protection strategies to address environmental credit constraints, while private enterprises mainly adopt evasive strategies. Environmental credit constraints make high-interest and high-profitability enterprises choose active environmental strategies. Environmental credit constraints generated by enterprises’ evasive environmental behavior increase the probability of litigation and arbitration cases, and environmental credit system construction in the short term may exacerbate unemployment, which the government needs to pay attention to when developing and implementing a blacklist system for environmental fraud. Although there are limitations in this paper in terms of research objectives and samples, the results are important for improving the environmental management system and the operating performance of enterprises.

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Section: Heterogeneity Analysismentioning

confidence: 99%

Environmental Credit Constraints and the Enterprise Choice of Environmental Protection Behavior

Yan,

Xiang,

et al. 2023

Sustainability

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“…Intensive studies have been performed on identifying factors, in order to improve the predictability of stock returns. Many factors have been proposed by the prior literature, including profitability (e.g., Fama and French (2006); Zhang and Zheng (2011); Chiu and Haight (2020); Chue and Xu (2022)) and asset growth (e.g., Titman et al (2004); Butler et al (2011); Stambaugh and Yuan (2017); Fama and French (2017); Gu et al (2018); Wen (2019); Hou et al (2020)). Cooper et al (2008) use an asset-growth measure which is calculated as the change in total assets divided by beginning assets.…”

Section: Literature Reviewmentioning

confidence: 99%

Agency Problem and Stock Returns: Combining Measures of Asset Growth and Gross Profit

Chen

Mohr

Rutherford

2023

JRFM

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In this paper, we propose a new factor in predicting stock returns, after taking agency problems into account. Although intensive studies have focused on asset growth and profitability as factors in predicting future returns, very limited attention has been given to their interaction. We construct a measure that combines both asset growth and scaled gross profit in a single measure (defined as AGGP, hereafter), by excluding the change in capital expenditures from gross profit. We demonstrate that our measure of profitability controls for the agency problem from managerial decisions in investment. Our results are also robust to the scaling issues raised by recent studies. Further, consistent with prior literature, our measure produces superior results in the full universe of CRSP stocks, but inferior results when applied to a subset of the 500 largest nonfinancial firms. This is consistent with the fact that those largest firms are less affected by the agency problem, leading to the failure of our new measure in predicting future returns among this subsample. In sum, our new measure sheds new lights on how to price agency issues, by providing a “cleaner” profitability measure free of agency costs and also lending supportive evidence to the mispricing explanation of the asset-growth effect.

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“…An investment is an asset or item accrued with the goal of making income or credit (Chue & Xu, 2022;Elankumaran & Ananth, 2013). In an economic outlook, an investment is the purchase of goods that are not consumed today but are used in the future to generate wealth (Kilic et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

Financial Literacy and Investment Behaviour of IT Professional With Reference To Bangalore City

Shaik¹,

Kethan²,

Jaggaiah3³

2022

ijjm

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IT sector plays a vital role in its contribution towards India’s GDP Savings and investments are imperative for fast-tracking economic growth and taking India to greater heights. The Purpose of this research is to understand the saving and investment behaviour of the IT professionals. There are various dimensions of savings and investment behaviour such as features of investment planning, determinants of investment preferences, IT Professionals have different mindset when they decide about investing in a particular avenue and they want his saving to be invested in most secure and liquid way. Though, the decision varies for every separate depending upon their risk aptitude. Their investment objective also differs from financial stability to additional income and so on. This paper attempts to find out the factors accountable for increased investing activities among young professionals. The current has studied the investment behaviour of IT investors by using a structured survey and this study inspects Behavioural Factors influencing towards Investment p among IT Professionals.

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Profitability, asset investment, and aggregate stock returns

Cited by 7 publications

References 49 publications

Environmental Credit Constraints and the Enterprise Choice of Environmental Protection Behavior

Environmental Credit Constraints and the Enterprise Choice of Environmental Protection Behavior

Agency Problem and Stock Returns: Combining Measures of Asset Growth and Gross Profit

Financial Literacy and Investment Behaviour of IT Professional With Reference To Bangalore City

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