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Market Timing and Capital Structure

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Author Info

  • Jeffrey A. Wurgler

    ()
    (Department of Finance)

  • Malcolm P. Baker

    ()
    (ard University, Harvard Business School, Finance Unit)

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.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm181.

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Date of creation: 30 Apr 2001
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Handle: RePEc:ysm:somwrk:ysm181

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Web page: http://icf.som.yale.edu/
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Keywords: Capital Structure; Market Timing;

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