EconPapers    
Economics at your fingertips  
 

The Impact of Market Timing on European Firms¡¯ Capital Structure: RLBOs vs. IPOs

Fadoua Kouki

International Journal of Financial Research, 2021, vol. 12, issue 2, 219-232

Abstract: Our study compares the impact of market timing on the capital structure of reverse leveraged buyouts (RLBOs) and initial public offerings (IPOs). Our sample is made up of 210 RLBOs and 210 public companies listed between 1995 and 2015 and linked by size (turnover) and industry (based on the first two digits of the SIC code). Our results show that the impact of market timing measures on capital structure is different between RLBOs and public companies. In accordance with Baker and Wurgler (2002) and others, these measures have a negative and significant effect on the capital structure of the two types of companies. This significance is persistent ten years after the IPO for public companies and only three years after the IPO for RLBOs. RLBOs rebalance the market timing effect on their capital structures much more quickly and therefore move toward the target debt ratio more quickly than their counterparts. These results challenge the robustness and generality of Baker and Wurgler¡¯s (2002) market timing theory. The capital structure of RLBOs seems to be better explained by the characteristic variables of companies suggested by the theory of trade-off.

Keywords: market timing theory; capital structure; RLBOs (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciedu.ca/journal/index.php/ijfr/article/view/18778/12231 (application/pdf)
http://www.sciedu.ca/journal/index.php/ijfr/article/view/18778 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:12:y:2021:i:2:p:219-232

DOI: 10.5430/ijfr.v12n2p219

Access Statistics for this article

International Journal of Financial Research is currently edited by Gina Perry

More articles in International Journal of Financial Research from International Journal of Financial Research, Sciedu Press
Bibliographic data for series maintained by Gina Perry ().

 
Page updated 2022-03-27
Handle: RePEc:jfr:ijfr11:v:12:y:2021:i:2:p:219-232