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Equity Mispricing , Financial Constraints , Market Timing and Targeting Behavior of Companies
| Content Provider | Semantic Scholar |
|---|---|
| Author | Iqbal-Hussain, Hafezali |
| Copyright Year | 2011 |
| Abstract | We test the market timing theory of capital structure using UK data by estimating intrinsic value of equities and find that the effect is statistically and economically significant. Managers increase debt (equity) issues during periods of undervaluation (overvaluation). We show that repurchasing behavior is equally influenced by equity mispricing. Financial constraints do affect timing behavior: Constrained firms are more sensitive to equity mispricing and the effect is evident particularly in repurchasing activities. Managers, thus, seem to time issues strategically out of necessity rather than being able to do so. Both timing of issues and repurchasing are influenced by reaching target leverage. The evidence suggests that managers are clearly aware of the cost of being off-target and weigh this against benefit gained from timing the market. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2011-Braga/papers/0098_update.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
