← Search

Journal of Finance Vol. 57 No. 1 2002

Market Timing and Capital Structure

Malcolm Baker1; Jeffrey Wurgler2,3,4

1 Harvard University · 2 IBM (United States) · 3 Cornell University · 4 New York University

Abstract

It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to historical market values. The results suggest the theory that capital structure is the cumulative outcome of past attempts to time the equity market.

DOI
10.1111/1540-6261.00414
Volume
57
Issue
1
Pages
1-32
Language
en
Sources
openalex bibtex:phds-export.bib crossref

Cite