THAI FIRMS' HISTORIES AND THEIR CAPITAL STRUCTURE

Tak Yan Law and Terence Tai Leung Chong
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Tak Yan Law: Department of Economics, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong

Annals of Financial Economics (AFE), 2011, vol. 06, issue 01, 1-14

Abstract: This paper examines the impacts of profitability, stock price performance and growth opportunity on the capital structure of firms in Thailand. The methodology of Kayhan and Titman (2007) is applied to model the dynamics of debt ratios. The results suggest that the leverage ratios of Thai firms do adjust towards their target levels. The deviations from the target due to the pecking-order and market timing effects are found to be significant. In contrast to Kayhan and Titman (2007), our results show that the market timing behavior does not persist.

Keywords: Capital structure; pecking-order theory; market timing theory; trade-off theory; G3 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1142/S2010495211500047

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