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Exploring the asset growth effect in the Australian equity market

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  • Jenni L Bettman
  • Mitch Kosev
  • Stephen J Sault

Abstract

This study presents the first empirical evidence on the existence of the asset growth effect in the Australian equity market. Specifically, we analyse all Australian listed firms over the period from 1998 to 2008, inclusive, to investigate whether the rate of growth in total assets has predictive power over subsequent stock returns. In addition, we conduct a multivariate analysis of the effect, providing the first application of dynamic panel methods using difference generalized method of moments (GMM) and system GMM to the asset growth literature. Results indicate that a significant asset growth effect exists when employing equal-weighted returns. However, this result disappears when utilizing value-weighted returns. In light of this, we further investigate the asset growth effect employing a multivariate analysis, which attempts to control for the influence of firm size. These results fail to confirm the existence of an asset growth effect. We argue that our initial evidence of an effect is due to the overstated influence of small stocks under equal weighting. Consequently, we are able to conclude from these results that over the period of our analysis, the asset growth effect does not exist in the Australian equity market.

Suggested Citation

  • Jenni L Bettman & Mitch Kosev & Stephen J Sault, 2011. "Exploring the asset growth effect in the Australian equity market," Australian Journal of Management, Australian School of Business, vol. 36(2), pages 200-216, August.
    • Handle: RePEc:sae:ausman:v:36:y:2011:i:2:p:200-216
    DOI: 10.1177/0312896211404572
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    Cited by:

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    3. Paul Y Dou & David R Gallagher & David H Schneider, 2013. "Dissecting anomalies in the Australian stock market," Australian Journal of Management, Australian School of Business, vol. 38(2), pages 353-373, August.
    4. Jennifer K Gippel, 2013. "A revolution in finance?," Australian Journal of Management, Australian School of Business, vol. 38(1), pages 125-146, April.
    5. Charles E. Hyde, 2018. "The Piotroski F†score: evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(2), pages 423-444, June.
    6. David R Gallagher & Peter A Gardner & Camille H Schmidt & Terry S Walter, 2014. "Quality investing in an Australian context," Australian Journal of Management, Australian School of Business, vol. 39(4), pages 615-643, November.
    7. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.

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    asset growth; dynamic panel methods;

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