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Impact of Market Timing on the Capital Structure of Russian Companies

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  • Zavertiaeva, Marina
  • Nechaeva, Iuliia

Abstract

Prior research on market timing theory in relation to developing markets only analyzes equity issuance and provides contradictory results. Using a sample of large Russian companies in nonfinancial sectors between 2008 and 2015, this paper analyzes both equity and debt market timing to explore the impact of market timing on firms’ capital structure. To test the robustness of the results, we use several proxies for both timing types and include Russian-specific control variables of corporate governance and ownership. The results show that Russian companies time the debt market to attract extra capital if the value of the interest rate in the current period is lower than the rates in previous periods. The net debt issued decreases when interest rates are high, which indicates debt market timing. Consistent with previous studies, we find that Russian companies do not time the equity market. Added corporate governance factors suggest that younger boards of directors prefer debt financing to equity issuance, as well as more experienced ones. State ownership is negatively connected with leverage.

Suggested Citation

  • Zavertiaeva, Marina & Nechaeva, Iuliia, 2017. "Impact of Market Timing on the Capital Structure of Russian Companies," Journal of Economics and Business, Elsevier, vol. 92(C), pages 10-28.
    • Handle: RePEc:eee:jebusi:v:92:y:2017:i:c:p:10-28
    DOI: 10.1016/j.jeconbus.2017.04.001
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    2. Kanwal Iqbal Khan & Faisal Qadeer & Mário Nuno Mata & Rui Miguel Dantas & João Xavier Rita & Jéssica Nunes Martins, 2021. "Debt Market Trends and Predictors of Specialization: An Analysis of Pakistani Corporate Sector," JRFM, MDPI, vol. 14(5), pages 1-16, May.
    3. Francisco Javier Vásquez Tejos & Hernán Marcelo Pape Larre, 2021. "Market Timing and Pecking Order Theory in Latin America," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 13(2), pages 345-370, August.

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    More about this item

    Keywords

    debt timing; equity timing; leverage; emerging markets; state ownership; corporate governance;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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