On July 27th, Xueping Wu, Associate Professor at City University of Hong Kong, and up-and-coming economist specializing in corporate finance, gave a lecture for students and faculty members at Waseda University. This workshop was supported by the Center for Empirical Analyses of Political Economy as a Top Global University Project of Waseda University, under the joint auspices of the Research Institute of Business Administration, Waseda University (RIBA) and the Waseda Institute for Advanced Study (WIAS). The moderator was Kazunori Suzuki, Professor at the Faculty of Commerce.
In the workshop, Dr. Wu presented results of a joint research with Chau Kin Au Yeung from the Chinese University of Hong Kong entitled “The Sensitivity of Investment to Cash Flow: A Firm Growth Type Explanation”. This study reported that the choice of capital structure of companies is influenced by the type of risk they face, and that the type of risk faced by companies is stable over a long period of time. In addition, at least from data of market in the United States, results of those empirical analyses suggest that financial constraints are not observed for companies with large growth opportunities. In the pecking order theory of traditional corporate finance (Myers, 1984; Myers and Majluf, 1984), the financing cost of a company is lowest when it uses its own cash flow (retained earnings), then using debt, and lastly issuing new equity. In contrast, those empirical results of Dr. Wu and his coauthor have shown that the preference of financing is not uniform across all companies. High-growth companies, especially those that show large uncertainty of its growth opportunity, tend to select new equity issues, while low-growth companies tend to select debt financing.
During the workshop, Dr. Wu and Waseda University Faculty (Hideaki Miyajima, Professor at Faculty of Commerce, Nobuhiko Hibara, Associate Professor at Faculty of Commerce, and Yoshiaki Ogura, Professor at Faculty of Political Science and Economics) had a lively exchange of views about research results, while students took notes eagerly. Classroom had a lively mood. In addition to this workshop, Dr. Wu conducted five sessions of special lecture for graduate students as well as individual guidance for the students. After the seminar, Dr. Wu and students chatted in a harmonious atmosphere.
