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Capital Structure and Stock Returns

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  • Ivo Welch

Abstract

U.S. corporations do not use their debt and equity issuing and repurchasing activities to counteract the mechanistic effects of stock returns on their debt equity ratios. Thus, over 1-5 year horizons, stock returns can explain about 40% of debt ratio dynamics. Although corporate (net) issuing activity is lively, and although it can explain the remaining 60% of debt ratio dynamics (long-term debt issuing activity being most capital structure relevant), corporate issuing mo

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm263.

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Date of creation: 01 Jan 2002
Date of revision: 01 Aug 2003
Handle: RePEc:ysm:somwrk:ysm263

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Web page: http://icf.som.yale.edu/
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  1. Berger, Philip G & Ofek, Eli & Yermack, David L, 1997. " Managerial Entrenchment and Capital Structure Decisions," Journal of Finance, American Finance Association, vol. 52(4), pages 1411-38, September.
  2. Shlomo Benartzi & Roni Michaely & Richard Thaler, . "Do Changes in Dividends Signal the Future or the Past?," CRSP working papers 327, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  3. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
  4. Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
  5. Michael J. Barclay & Clifford W. Smith & Ross L. Watts, 1995. "The Determinants Of Corporate Leverage And Dividend Policies," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(4), pages 4-19.
  6. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
  7. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, 02.
  8. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  9. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  10. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  11. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  12. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  13. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  14. Peter MacKay & Gordon M. Phillips, 2002. "Is There an Optimal Industry Financial Structure?," NBER Working Papers 9032, National Bureau of Economic Research, Inc.
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