Informative value of firm capital structure

Patrik Bauer and Vit Bubak

Prague Economic Papers, 2003, vol. 2003, issue 3, 233-248

Abstract: In this paper, the informative value of firm capital structure is analyzed. In the first part, a theoretical background regarding capital structure theories is presented. In the second (empirical) part, the Ohlson (1995) valuation framework is used in order to analyze the informative value of firm capital structure on a sample of data for the Czech (non-financial) companies. A contextual approach is adopted and the value relevance of debt is analyzed considering the signalling and the optimal capital structure theories. According to the results and in accordance with the optimal capital structure theory, debt is more penalized in case of the companies that deviate from the target debt level. Moreover, debt proves to be a positive signal for the firms with a higher earnings growth potential. This, in turn, is consistent with the signalling theory.

Keywords: conditional capital structure theories; Ohlson valuation model; optimal capital structure theory; signalling theory (search for similar items in EconPapers)
JEL-codes: G10 G32 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (1)

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DOI: 10.18267/j.pep.216

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