Both market timing and investment-based theories of corporate financing predict underperformance after firms raise capital, but only market timing predicts that the composition of financing (equity compared to debt) should also forecast returns. In cross-sectional tests, we find that the amount of net financing is more important than its composition in explaining future stock returns. In the ti...

Ample evidence points to a negative relation between internal funds (profitability) and the demand for external funds (debt issuance). This relation has been interpreted as evidence supporting the pecking order theory. We show, however, that the negative effect of internal funds on the demand for external financing is concentrated among firms that are least likely to face high external financin...

Evidence from low-income Asian countries shows that performance-based financing (as a specific form of contracting) can improve health service delivery more successfully than traditional input financing mechanisms. We report a field experience from Rwanda demonstrating that performance-based financing is a feasible strategy in sub-Saharan Africa too. Performance-based financing requires at leas...

We develop a comprehensive and parsimonious measure of the extent to which a firm is raising (distributing) capital from (to) capital market participants. We show that the relation between our measure of net external financing and future stock returns is stronger than has been documented in previous research focusing on individual categories of financing transactions. Decompositions of our meas...

The articles in this special issue have demonstrated how unprecedented transitions have come with both challenges and opportunities for health financing. Against the background of these challenges and opportunities, the Working Group on Health Financing at the Chatham House Centre on Global Health Security laid out, in 2014, a set of policy responses encapsulated in 20 recommendations for how t...

This paper investigates the interactions between preemptive competition and leverage. We find that the second mover always leaves the duopoly market before the first mover, although the leader may exit before the follower’s entry. We also see the leverage effects of debt financing increasing firm values and accelerating investment, even in the presence of preemptive competition. In addition to ...

Because of external financing costs, private business owners often need to self-finance new investment projects. These self-financing needs create an incentive for business owners to hold financial assets whose payoffs are positively correlated with self-financing needs. If this effect is aggregated, expected returns on financial assets should be negatively correlated with aggregate private inv...

We study the role of financial market development in the financing choice of firms in developing countries using a dynamic panel approach with aggregate firm-level data. The results suggest that equity market development favors firms’ equity financing over debt financing, while banking sector development favors debt financing over equity financing, as one would expect. However, surprisingly, eq...

Investment in a constructed facility represents a cost in the short term that returns benefits only over the long term use of the facility. Thus, the costs occur earlier than the benefits, and the owners of facilities must obtain the capital resources to finance the costs of construction. A project cannot proceed without an adequate financing, and the cost of providing an adequate financing can...

Non-technical summary Founders often have big problems with firm financing issues. Financing problems may arise for many reasons. Information asymmetry and uncertainty are important, but so are such things as ignorance. Experienced entrepreneurs should have more knowledge about financing issues and should be more likely to know who to turn to for help and advice. Thus, they have advantages over...