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Does financing behavior of Tunisian firms follow the predictions of the market timing theory of capital structure?

Author

Listed:
  • Duc Khuong Nguyen

    () (ISC Paris School of Management, France)

  • Adel Boubaker

    () (Faculty of Economics and Management, Tunis, Tunisia)

Abstract

In this paper, we show how capital structure decisions made by non-financial firms listed in the Tunis Stock Exchange are affected by the predictions of the so-called market timing theory. Using a set of some relevant variables which reflect the market-timing signals, the firm fundamentals, and the performance of local stock market, we mainly find that leverage ratio of Tunisian firms is short-term driven by their current market valuations. In the long run, the market timing effects are not present at all. Rather, Tunisian firms seem to behave according to the tradeoff theory of capital structure by attempting to adjust their leverage levels towards a target ratio.

Suggested Citation

  • Duc Khuong Nguyen & Adel Boubaker, 2009. "Does financing behavior of Tunisian firms follow the predictions of the market timing theory of capital structure?," Economics Bulletin, AccessEcon, vol. 29(1), pages 169-181.
  • Handle: RePEc:ebl:ecbull:eb-08g30009
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    References listed on IDEAS

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    Cited by:

    1. Sabri Boubaker & Taher Hamza, 2014. "Does managerial overconfidence matter in explaining debt financing policy?," Economics Bulletin, AccessEcon, vol. 34(4), pages 2324-2339.

    More about this item

    Keywords

    Market timing theory;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • F0 - International Economics - - General

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