Market Timing and Capital Structure

Preprint

1 January 2001

preprint

Published in RePEc

Abstract

It is well known that firms tend to raise equity when their market values are high relative to book and past market values. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to past market valuations. The results are difficult to explain within traditional theories of capital structure and suggest that capital structure is the cumulative outcome of past attempts to time the equity market.

Keywords

CAPITAL STRUCTURE
EQUITY MARKET
MARKET TIMING
MARKET VALUES
RAISE EQUITY
FIRMS TEND
OUTCOME

All Related Versions

Version 1, 2001-01-01, RePEc

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