How Persistent Is the Impact of Market Timing on Capital Structure?
AbstractThis paper examines the capital structure implications of market timing. I isolate timing attempts in a single major financing event, the initial public offering, by identifying market timers as firms that go public in hot issue markets. I find that hot-market IPO firms issue substantially more equity, and lower their leverage ratios by more, than cold-market firms do. However, immediately after going public, hot-market firms increase their leverage ratios by issuing more debt and less equity relative to cold-market firms. At the end of the second year following the IPO, the impact of market timing on leverage completely vanishes. Copyright 2006 by The American Finance Association.
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Bibliographic InfoArticle provided by American Finance Association in its journal The Journal of Finance.
Volume (Year): 61 (2006)
Issue (Month): 4 (08)
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