Journal of Financial Intermediation Vol. 17 No. 2 2008
Market timing and the debt–equity choice
Abstract
We test the market timing theory of capital structure using an earnings-based valuation model that allows us to separate equity mispricing from growth options and time-varying adverse selection; thus avoiding the multiple interpretations of book-to-market ratio. We find that equity market mispricing plays a significant, if not dominant, role in the security choice decision. Our results are robust to the inclusion of proxies for time-varying growth options and alternate methods of measuring misvaluation.
- DOI
- 10.1016/j.jfi.2007.05.002
- Volume
- 17
- Issue
- 2
- Pages
- 175-197
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref