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Does equity market timing have a persistent impact on capital structure? Evidence from China

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  • Zhao, Yang
  • Lee, Cheng-Few
  • Yu, Min-Teh

Abstract

This paper uses the change in individual securities accounts as a measure of equity funding supply to examine whether the persistent timing effect on capital structure exists for the Chinese equity market. This new equity timing measure avoids previous criticisms over a timing measure not being independent of a firm's characteristics of capital structure. Our empirical results show that this new measure is an effective market timing variable for issuing equity in the Chinese equity market, and that a persistent effect of equity market timing on firm capital structure exists for more than 7 years. This paper offers evidence that the market conditions of equity funding supply play an important role in corporate financing decisions in China.

Suggested Citation

  • Zhao, Yang & Lee, Cheng-Few & Yu, Min-Teh, 2020. "Does equity market timing have a persistent impact on capital structure? Evidence from China," The British Accounting Review, Elsevier, vol. 52(1).
    • Handle: RePEc:eee:bracre:v:52:y:2020:i:1:s0890838919300642
    DOI: 10.1016/j.bar.2019.100838
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