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Why Does Equity Capital Flow out of High Tobin’sIndustries?
[How q and cash flow affect investment without frictions: An analytic explanation]

Author

Listed:
  • Dong Wook Lee
  • Hyun-Han Shin
  • René M Stulz
  • David Denis

Abstract

High Tobin’sindustries receive more funding from capital markets than low Tobin’sindustries from 1971 to 1996. Since then, the opposite is true. The key to understanding this shift is that large firms, for whichis more a proxy for rents than investment opportunities, have become more important within industries. For these firms, repurchases but not capital expenditures increase in the cross-section with , so thatexplains the variation of repurchases more than of capital expenditures. Consequently, equity capital flows out of highindustries because for these industries stock repurchases are high and issuances are low.

Suggested Citation

  • Dong Wook Lee & Hyun-Han Shin & René M Stulz & David Denis, 2021. "Why Does Equity Capital Flow out of High Tobin’sIndustries? [How q and cash flow affect investment without frictions: An analytic explanation]," The Review of Financial Studies, Society for Financial Studies, vol. 34(4), pages 1867-1906.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:4:p:1867-1906.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa086
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    Cited by:

    1. Gianni Guastella & Matteo Mazzarano & Stefano Pareglio & Riccardo Christopher Spani, 2022. "Do environmental and emission disclosure affect firms’ performance?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 695-718, December.

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