Determinants of target capital structure: The case of dual debt and equity issues

Journal of Financial Economics
Volume 71, Issue 3, March 2004, Pages 517-540


AbstractWe examine whether market and operating performance affect corporate financing behavior because they are related to target leverage. Our focus on firms that issue both debt and equity enhances our ability to draw inferences. Consistent with dynamic trade-off theories, dual issuers offset the deviation from the target resulting from accumulation of earnings and losses. Our results also imply that high market-to-book firms have low target debt ratios. On the other hand, consistent with market timing, high stock returns increase the probability of equity issuance but have no effect on target leverage.

Author Keywords: Author Keywords: Capital structure; Target leverage; Equity market timing; Dual issues



Link:http://www.sciencedirect.com/sci ... cb28e08d564d07f40e2