Ideally, the empirical analysis should be guided by
(i) models linking changes in a firm’s financing- investment production decisions with
parameters included in an asset pricing model.
and (ii) an understanding of
the diverse set of information sources the market may use to assess the
impact of these decisions.
In the immediate future. it is probable that
attempts to explicitly incorporate models on (i) and (ii) into a research
design will appear simplistic.
However,
the alternative approach of ‘letting
the data tell it as it is’ is less likely to yield a rich and reliable set of research
findings.