Capital Structure: The Emprical Investigation of Market Timing Theory

This paper investigated the effect of Market Timing Theory on capital structure. We examined capital structure to past market valuations. The firms with low leverage tend to financed when their valuations were high, as measured by the market-to-book ratio (MTB). The firms with high leverage tend to...

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Autores principales:	Gholamreza Kordestani, Tannaz Pirdavari
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2012
Materias:	market timing theory capital structurethoeries mtb Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/089f0240f8a8421aac4f76b6c3757ce4
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spelling	oai:doaj.org-article:089f0240f8a8421aac4f76b6c3757ce42021-11-04T19:42:26ZCapital Structure: The Emprical Investigation of Market Timing Theory2008-89142476-292X10.22103/jak.2012.118https://doaj.org/article/089f0240f8a8421aac4f76b6c3757ce42012-08-01T00:00:00Zhttps://jak.uk.ac.ir/article_118_c5492f7a60e31735b16041604d337ab9.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XThis paper investigated the effect of Market Timing Theory on capital structure. We examined capital structure to past market valuations. The firms with low leverage tend to financed when their valuations were high, as measured by the market-to-book ratio (MTB). The firms with high leverage tend to be those that raised funds when their valuations were low. Temporary changes in market-to-book lead to permanent changes in capital structure and temporary increases in market-to-book lead to permanent increases in cash balances. Then the results are also difficult to reconcile with the pecking order and trade-off theory. The results are consistent with the theory that capital structure is the cumulative outcome of a series of market-timing-motivated financing decisions.We analysed data of 101 firms listed in Tehran Stock Exchange in periods 1378-1386. The result shows that Capital Structure is not consistent with Market Timing Theory.Gholamreza KordestaniTannaz PirdavariShahid Bahonar University of Kermanarticlemarket timing theorycapital structurethoeriesmtbAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 3, Iss 9, Pp 123-142 (2012)
institution	DOAJ
collection	DOAJ
language	FA
topic	market timing theory capital structurethoeries mtb Accounting. Bookkeeping HF5601-5689
spellingShingle	market timing theory capital structurethoeries mtb Accounting. Bookkeeping HF5601-5689 Gholamreza Kordestani Tannaz Pirdavari Capital Structure: The Emprical Investigation of Market Timing Theory
description	This paper investigated the effect of Market Timing Theory on capital structure. We examined capital structure to past market valuations. The firms with low leverage tend to financed when their valuations were high, as measured by the market-to-book ratio (MTB). The firms with high leverage tend to be those that raised funds when their valuations were low. Temporary changes in market-to-book lead to permanent changes in capital structure and temporary increases in market-to-book lead to permanent increases in cash balances. Then the results are also difficult to reconcile with the pecking order and trade-off theory. The results are consistent with the theory that capital structure is the cumulative outcome of a series of market-timing-motivated financing decisions.We analysed data of 101 firms listed in Tehran Stock Exchange in periods 1378-1386. The result shows that Capital Structure is not consistent with Market Timing Theory.
format	article
author	Gholamreza Kordestani Tannaz Pirdavari
author_facet	Gholamreza Kordestani Tannaz Pirdavari
author_sort	Gholamreza Kordestani
title	Capital Structure: The Emprical Investigation of Market Timing Theory
title_short	Capital Structure: The Emprical Investigation of Market Timing Theory
title_full	Capital Structure: The Emprical Investigation of Market Timing Theory
title_fullStr	Capital Structure: The Emprical Investigation of Market Timing Theory
title_full_unstemmed	Capital Structure: The Emprical Investigation of Market Timing Theory
title_sort	capital structure: the emprical investigation of market timing theory
publisher	Shahid Bahonar University of Kerman
publishDate	2012
url	https://doaj.org/article/089f0240f8a8421aac4f76b6c3757ce4
work_keys_str_mv	AT gholamrezakordestani capitalstructuretheempricalinvestigationofmarkettimingtheory AT tannazpirdavari capitalstructuretheempricalinvestigationofmarkettimingtheory
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Capital Structure: The Emprical Investigation of Market Timing Theory

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