Topic: The Two Faces of Firm Valuation Uncertainty: Insights from the Persistence of Investment Styles and Financial Policies
Speaker: Xueping Wu, Associate Professor of Finance, City University of Hong Kong
Date: March 25th (Wed.)
Time: 2:00-3:30pm
Location: Building 4, Room 101
Language: English
Abstract:
Using the volatility of a listed firm’s monthly market-to-book ratio (MBVol) as a measure of valuation uncertainty about the firm’s growth prospects, this paper demonstrates that high and low annual MBVol’s are persistent. Initial-MBVol-sorted firms have distinct investment styles (R&D/[R&D+CAPEX]) and financial policies that are persistent over 20 years. More precisely, firms with more growth uncertainty are persistently more R&D intensive. An Initial-MBVol-aligned pattern in external finance reveals two faces of valuation uncertainty: firms with low growth uncertainty obey the classic adverse-selection pecking order in financing, but high growth uncertainty appears to facilitate rather than inhibit new equity financing.
About the speaker:
Xueping Wu is Associate Professor of Finance at City University of Hong Kong. Dr. Wu joined City University of Hong Kong in 1995 after obtaining a PhD in Applied Economics from K.U. Leuven. His research interests are both theoretical and empirical, covering Corporate Finance, Asset Pricing and Capital Markets, and International Finance. He has published articles in high quality academic journals such as Journal of Business, Review of Finance and Journal of Banking and Finance . He has won several best paper awards including the 1999-WFA Award for the Best Paper in Corporate Finance.
