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Does Market Timing Drive Capital Structure? Empirical Evidence from an Emerging Market

  • Sibel ÇELÝK

    (Dumlupinar University, Banking and Finance Department, Kutahya, Turkey.)

  • Yasemin Deniz AKARIM

    (Dumlupinar University, Banking and Finance Department, Kutahya, Turkey.)

Registered author(s):

    The purpose of this study is to test how equity market timing affects capital structure from the perspective of IPO (Initial Public Offering) event in ISE for the period between 1999-2008. Our dataset comprises of all firms (75 firms) that went public from the period of January 1999 to December 2008 in Turkey that are available in ISE database. We analyse the market timing theory by applying cross sectional regression method. For this purpose, first, we test the impact of market timing on the amount of equity issued by IPO firms. Second we examine the impact of market timing on capital structure. We conclude that market timing theory is not valid for Turkey.

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    Article provided by Econjournals in its journal International Journal of Economics and Financial Issues.

    Volume (Year): 3 (2013)
    Issue (Month): 1 ()
    Pages: 140-152

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    Handle: RePEc:eco:journ1:2013-01-14
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    1. Altı, Aydoğan & Sulaeman, Johan, 2012. "When do high stock returns trigger equity issues?," Journal of Financial Economics, Elsevier, vol. 103(1), pages 61-87.
    2. Tijs Bie & Leo Haan, 2007. "Market Timing and Capital Structure: Evidence for Dutch Firms," De Economist, Springer, vol. 155(2), pages 183-206, June.
    3. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, 02.
    4. Jain, Bharat A & Kini, Omesh, 1994. " The Post-Issue Operating Performance of IPO Firms," Journal of Finance, American Finance Association, vol. 49(5), pages 1699-1726, December.
    5. W. Allard Bruinshoofd & Leo de Haan, 2012. "Market timing and corporate capital structure: a transatlantic comparison," Applied Economics, Taylor & Francis Journals, vol. 44(28), pages 3691-3703, October.
    6. AYDOĞAN ALTI, 2006. "How Persistent Is the Impact of Market Timing on Capital Structure?," Journal of Finance, American Finance Association, vol. 61(4), pages 1681-1710, 08.
    7. repec:dgr:kubcen:199883 is not listed on IDEAS
    8. Ming Dong & Igor Loncarski & Jenke ter Horst & Chris Veld, 2012. "What Drives Security Issuance Decisions: Market Timing, Pecking Order, or Both?," Financial Management, Financial Management Association International, vol. 41(3), pages 637-663, 09.
    9. Elliott, William B. & Koëter-Kant, Johanna & Warr, Richard S., 2008. "Market timing and the debt-equity choice," Journal of Financial Intermediation, Elsevier, vol. 17(2), pages 175-197, April.
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