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Market Timing and Capital Structure

Jeffrey Wurgler () and Malcolm Baker

Yale School of Management Working Papers from Yale School of Management

Abstract: It is well known that firms tend to raise equity when their market values are high relative to book and past market values. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to past market valuations. The results are difficult to explain within traditional theories of capital structure and suggest that capital structure is the cumulative outcome of past attempts to time the equity market.

Keywords: Capital Structure; Market Timing (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2001-04-30
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