Financial constraints and stock returns: An evidence from the Philippines

• Main Authors: Garcia, Mary Stephanie R., Manalo, Alvin Joshua Z., Tsoi, Janella Steffie L., Yupangco, Lara Gabrielle V.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Business enterprises—Finance; Stocks—Rate of return; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6463; https://animorepository.dlsu.edu.ph/context/etd_bachelors/article/7107/viewcontent/Thesis_Paper__Group_13_b.pdf
• Institution: De La Salle University

The study aims to establish whether the financial constraint factor impact stock returns for publicly listed companies in the Philippines from 2007 to 2014. The researchers utilized the whited-Wu (WW) index to determine the magnitude of financial constraint of Philippine industrial firms. Subsequently, the firms were grouped into 9 cross-sorted portfolios that were constructed based on their magnitude of financial constraint and market capitalization. The portfolio returns and characteristics analysis showed that more financially constrained firms are bound to have higher excess returns compared to less financially constrained firms. Trend analysis provided evidence that the financial constraint factor does exist and time series regressions depicted that there is an impact from the financial constraint factor on portfolio returns, particularly on small cap-highly constrained (SH) portfolio returns.