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Net stock issuance anomaly and cash flow explanation: A research note

Author

Listed:
  • Alan Meng Li

    (Independent, Australia)

  • Dharmendra Naidu
  • Farshid Navissi
  • Kumari Ranjeeni

    (Department of Accounting, Monash Business School, Caulfield East, Australia)

Abstract

Prior studies show that net stock issuance is negatively associated with the cross section of future stock returns, reflecting a market anomaly. Our study provides empirical evidence on whether cash flow can mitigate such anomaly. Consistent with prior research, we initially provide evidence of the anomaly in our sample and that the anomaly persists in the presence of cash flow. We then decompose net stock issuance into stock issues and stock repurchases and find that the anomaly is only driven by stock issues but not stock repurchases and that the stock issues’ anomaly persists even in the presence of cash flow. JEL Classification: G12, G14

Suggested Citation

  • Alan Meng Li & Dharmendra Naidu & Farshid Navissi & Kumari Ranjeeni, 2018. "Net stock issuance anomaly and cash flow explanation: A research note," Australian Journal of Management, Australian School of Business, vol. 43(2), pages 286-304, May.
    • Handle: RePEc:sae:ausman:v:43:y:2018:i:2:p:286-304
    DOI: 10.1177/0312896217717306
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    More about this item

    Keywords

    Cash flow; net stock issuance anomaly; stock issue; stock repurchase;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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