Financing Decisions and Abnormal Returns: An Analysis of Brazilian Companies

    Cesar Augusto Camargos Rocha   Bio
    ; Marcos Antônio de Camargos   Bio


Download data is not yet available.


In this paper, we developed an approach for the empirical testing of the relationship between the financing choices of companies and the abnormal returns obtained by their shareholders. We innovate by incorporating controls on how this relationship is affected by the capabilities of each funding source, at different levels of returns, through quantile regression. The estimation of the model for a sample of Brazilian companies indicates the inexistence of a significant relationship between abnormal returns and debt issuance. The same occurs between abnormal returns and equity issuance, with one exception: when there is a deficit of internal financing that extrapolates the available safe debt and the abnormal returns are, at least, median, this relationship becomes significant and positive. Considered as a whole, the results suggest an indifference to the sources of funds used by the company. Among the contributions, we highlight the incorporation of the aforementioned controls, which bridges the gap identified in the literature relating business financial flows and stock returns.

Keyword : Financing Decisions, Pecking Order Theory, Abnormal Returns, Test Methodology Decisões de Financiamento, Pecking Order Theory, Retornos Anormais, Metodologia de Teste.

How to Cite
Rocha, C. A. C., & Camargos, M. A. de. (2023). Financing Decisions and Abnormal Returns: An Analysis of Brazilian Companies. Brazilian Business Review, 21(3).


Adams, J., Hayunga, D., Mansi, S., Reeb, D., & Verardi, V. (2019). Identifying and treating outliers in finance. Financial Management, 48(2), 345–384. Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, 19(6), 716–723. Bache, S. H. M., Dahl, C. M., & Kristensen, J. T. (2013). Headlights on tobacco road to low birthweight outcomes. Empirical Economics, 44(3), 1593–1633. Chirinko, R. S., & Singha, A. R. (2000). Testing static tradeoff against pecking order models of capital structure: A critical comment. Journal of Financial Economics, 58(3), 417–425. https:// Copeland, T., Dolgoff, A., & Moel, A. (2004). The role of expectations in explaining the crosssection of stock returns. Review of Accounting Studies, 9(2), 149–188. D’Mello, R., Gruskin, M., & Kulchania, M. (2018). Shareholders valuation of long-term debt and decline in firms’ leverage ratio. Journal of Corporate Finance, 48, 352–374. Dunn, O. J. (1964). Multiple Comparisons Using Rank Sums. Technometrics, 6(3), 241–252. https:// Durand, D. (1952). Costs of debt and equity funds for business: Trends and problems of measurement. Conference on Research in Business Finance, 215–262. Durand, D. (1959). The cost of capital, corporation finance, and the theory of investment: Comment. The American Economic Review, 49(4), 639–655. Fama, E. F., & French, K. R. (1998). Taxes, financing decisions, and firm value. The Journal of Finance, 53(3), 819–843. Fox, J., & Monette, G. (1992). Generalized Collinearity Diagnostics. Journal of the American Statistical Association, 87(417), 178–183. Hollander, M., Wolfe, D. A., & Chicken, E. (2013). A Distribution-Free Test for General Alternatives (Kruskal–Wallis). In Nonparametric statistical methods (3rd ed., Vol. 751, pp. 204–215). John Wiley & Sons. Koenker, R. (2021). Quantile Regression [R package quantreg version 5.86]. Comprehensive R Archive Network (CRAN). Koenker, R., & Bache, S. H. (2011). rqpd: Regression Quantiles for Panel Data version 0.6 from R-Forge. Koenker, R., & Hallock, K. F. (2001). Quantile regression. Journal of Economic Perspectives, 15(4), 143–156. Koenker, R., & Machado, J. A. F. (1999). Goodness of Fit and Related Inference Processes for Quantile Regression. Journal of the American Statistical Association, 94(448), 1296–1310. https:// Koller, M., & Stahel, W. A. (2017). Nonsingular subsampling for regression S estimators with categorical predictors. Computational Statistics, 32(2), 631–646. Lemmon, M.L., & Zender, J. F. (2010). Debt capacity and tests of capital structure theories. Journal of Financial and Quantitative Analysis, 45(5), 1161–1187. Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297. Modigliani, F., & Miller, M. H. (1959). The cost of capital, corporation finance and the theory of investment: Reply. The American Economic Review, 49(4), 655–669. Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574–592. https:// Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221. Papanastasopoulos, G., Thomakos, D., & Wang, T. (2011). Information in balance sheets for future stock returns: Evidence from net operating assets. International Review of Financial Analysis, 20(5), 269–282. Rocha, C. A. C., & Camargos, M. A. (2023). Preferences, sources, and conditionals: a new approach to testing financing decisions. Revista Contabilidade & Finanças, 34(91), e1624. https://doi. org/10.1590/1808-057x20221624.en Rousseeuw, P. J., & Hubert, M. (2018). Anomaly detection by robust statistics. WIREs Data Mining and Knowledge Discovery, 8(2), e1236. Royston, J. P. (1982). An Extension of Shapiro and Wilk’s W Test for Normality to Large Samples. Journal of the Royal Statistical Society. Series C (Applied Statistics), 31(2), 115–124. https://doi. org/10/dh6fpx Schwarz, G. (1978). Estimating the dimension of a model. Annals of statistics, 6(2), 461–464. https:// Shapiro, S. S., & Wilk, M. B. (1965). An Analysis of Variance Test for Normality (Complete Samples). Biometrika, 52(3/4), 591–611. Shyam-Sunder, L., & Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), 219–244. Vo, X. V., & Ellis, C. (2017). An empirical investigation of capital structure and firm value in Vietnam. Finance Research Letters, 22, 90–94.

Send mail to Author

Send Cancel