Authors tested whether the impact of financial constraints on firm value is observable
stock returns. They formed portfolios of firms based on observable characteristics
to financial constraints, and test for common variation in stock returns. Financially
constrained firms stock returns move together over time, suggesting that constrained
firms are subject to common shocks. Constrained firms have low average stock returns
in our 1968-1997 sample of growing manufacturing firms. They finded no evidence that
the relative performance of constrained firms reflects monetary policy, credit conditions,
or business cycles.