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This study is the first to examine the impacts of working capital (WC) and financial constraints on cross-sectional stock returns in Taiwan. The findings indicate a non-linear relationship between WC and stock returns. Moreover, the nonlinearity between WC and cross-sectional stock returns is robust after controlling for financial constraints, risk...
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Context 1
... results align with Khoa et al. (2020), trade-off theory and the pecking order theory. Table 4 reports the results of DEVIATIONS from minimum WC and stock returns. It shows that deviations remain positive and significant at a reasonable level across all samples, implying that any deviations from the minimum level of WC increase stock returns. ...Context 2
... shows that deviations remain positive and significant at a reasonable level across all samples, implying that any deviations from the minimum level of WC increase stock returns. The last column of Table 4 presents regression with the interaction term. The findings from model 7b show that DEVIATIONS are also positive and significant. ...Context 3
... the coefficients of the INTERACT term are negative and significant, suggesting that the belowminimum WC side enhances stock returns more than the above-minimum WC side. In other words, firms with a below-minimum WC level can gain higher stock returns than Table 3 Benchmark Specification BM SZ IVOL LEV ROE TAG NS NIG TVOL ADJ.R 0.042*** 0.041*** -0.002*** -0.528*** 0.177*** 0.003 0. 0001 -0.002*** -0.002*** 0 Table 4 confirms a large and statistically significant U-shaped relationship between WC and stock returns. A trade-off relationship exists between liquidity and stock returns for firms that do not meet the WC minimum level. ...Similar publications
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