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Author: | Chen, C. Ainina, F. |
Title: | Financial ratio adjustment dynamics and interest rate expectations |
Journal: | Journal of Business Finance and Accounting
1994 : DEC, VOL. 21:8, p. 1111-1126 |
Index terms: | BUSINESS RATIOS INTEREST RATES EXPECTATIONS |
Language: | eng |
Abstract: | This paper re-examines the financial ratio adjustment model by (1) respecifying the model such that the speed of adjustment coefficient follows a dynamic adjustment process in response to some kind of economic shocks, and (2) proposing a joint estimation of firms within the same industry to capture unobservable industry effects. Examining six financial ratios within seven industries that contain 85 firms, the authors' results reveal that a joint estimation method substantially improves the traditional model. |
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