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Asset growth and stock returns in european equity markets: Implications of investment and accounting distortions

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  • Artikis, Panagiotis G.
  • Diamantopoulou, Lydia
  • Papanastasopoulos, Georgios A.
  • Sorros, John N.

Abstract

We study the effect of growth in firms' balance sheets on stock returns by decomposing asset growth into two components, one that captures real investment growth and one that captures accounting distortions and/or reduced efficiency. We show that these components play significant and complementary roles in driving the asset growth anomaly in European equity markets. The effect of the real investment growth (accounting distortions and/or reduced efficiency) component on stock returns, is found stronger in countries with higher (lower) degree of market efficiency, weaker (stronger) barriers to arbitrage, stronger (weaker) corporate governance and less (more) managerial discretion over earnings.

Suggested Citation

  • Artikis, Panagiotis G. & Diamantopoulou, Lydia & Papanastasopoulos, Georgios A. & Sorros, John N., 2022. "Asset growth and stock returns in european equity markets: Implications of investment and accounting distortions," Journal of Corporate Finance, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:corfin:v:73:y:2022:i:c:s0929119922000360
    DOI: 10.1016/j.jcorpfin.2022.102193
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    3. Lu, Jing & Yang, Nien-Tzu & Ho, Keng-Yu & Ko, Kuan-Cheng, 2022. "Lottery demand and the asset growth anomaly," Finance Research Letters, Elsevier, vol. 48(C).

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    More about this item

    Keywords

    Asset growth; Stock returns; Investment; Accounting distortions;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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