scholarly journals The Impact of Market Timing on European Firms’ Capital Structure: RLBOs vs. IPOs

2021 ◽  
Vol 12 (2) ◽  
pp. 219
Author(s):  
Fadoua Kouki
Keyword(s):  
Capital Structure ◽  
Initial Public Offerings ◽  
Market Timing ◽  
Debt Ratio ◽  
Public Companies ◽  
Public Offerings ◽  
Timing Effect ◽  
Reverse Leveraged Buyouts ◽  
The Impact ◽  
The Capital Structure

Our study compares the impact of market timing on the capital structure of reverse leveraged buyouts (RLBOs) and initial public offerings (IPOs). Our sample is made up of 210 RLBOs and 210 public companies listed between 1995 and 2015 and linked by size (turnover) and industry (based on the first two digits of the SIC code). Our results show that the impact of market timing measures on capital structure is different between RLBOs and public companies. In accordance with Baker and Wurgler (2002) and others, these measures have a negative and significant effect on the capital structure of the two types of companies. This significance is persistent ten years after the IPO for public companies and only three years after the IPO for RLBOs. RLBOs rebalance the market timing effect on their capital structures much more quickly and therefore move toward the target debt ratio more quickly than their counterparts. These results challenge the robustness and generality of Baker and Wurgler’s (2002) market timing theory. The capital structure of RLBOs seems to be better explained by the characteristic variables of companies suggested by the theory of trade-off.

scholarly journals Property Rights, Tax Avoidance and Capital Structure: Data from China Stock Markets

2018 ◽  
Vol 10 (11) ◽  
pp. 13
Author(s):  
Pei Wang ◽  
Kun Guo ◽  
Dan Ding ◽  
Shuyi Li
Keyword(s):  
Capital Structure ◽  
Economic System ◽  
Negative Correlation ◽  
Tax Avoidance ◽  
Listed Companies ◽  
Debt Ratio ◽  
Share Ownership ◽  
Significant Difference ◽  
The Impact ◽  
The Capital Structure

This paper investigates the influence of tax avoidance on capital structure based on share ownership under China’s economic system. Previous research has indicated that tax avoidance exits and has a potential effect on firms’ capital structure, but there is little literature focusing on this influence based on China’s economic system. In light of that, this paper uses A-share data of the Shanghai and Shenzhen stock exchange from 2007 to 2016 as samples to study the impact of tax avoidance on the capital structure based on China’s economic system. The results suggest that, firstly, there is a significant negative correlation between tax avoidance and the debt ratio of the listed companies; secondly, there is a significant difference in the effect of corporate tax avoidance on the debt ratio of different industries and different equity ownership. Besides, by regrouping the samples according to the share ownership and the degree of tax avoidance, it is revealed that China’s unique economic system would lead to an impact of tax avoidance on the capital structure that differs from other countries. Finally, it is found that there is a negative correlation between the degree of tax avoidance of the listed companies and the dynamic adjustment of assets-liability ratio through the extended study, further verifying that there is a substitution relationship between tax avoidance of the listed companies and their debt financing.

scholarly journals Contingent Convertible Debt: The Impact on Equity Holders

Risks ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 47 ◽  
Author(s):  
Delphine Boursicot ◽  
Geneviève Gauthier ◽  
Farhad Pourkalbassi
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Cost Of Debt ◽  
Debt Ratio ◽  
Convertible Debt ◽  
Total Cost ◽  
Contingent Convertible Debt ◽  
The Cost ◽  
The Impact ◽  
The Capital Structure

Contingent Convertible (CoCo) is a hybrid debt issued by banks with a specific feature forcing its conversion to equity in the event of the bank’s financial distress. CoCo carries two major risks: the risk of default, which threatens any type of debt instrument, plus the exclusive risk of mandatory conversion. In this paper, we propose a model to value CoCo debt instruments as a function of the debt ratio. Although the CoCo is a more expensive instrument than traditional debt, its presence in the capital structure lowers the cost of ordinary debt and reduces the total cost of debt. For preliminary equity holders, the presence of CoCo in the bank’s capital structure increases the shareholder’s aggregate value.

scholarly journals IPO Waves: How Market Performances Influence The Market Timing Of IPO?

2015 ◽  
Vol 31 (5) ◽  
pp. 1679
Author(s):  
Firas Batnini ◽  
Moez Hammami
Keyword(s):  
Stock Market ◽  
Initial Public Offerings ◽  
Market Timing ◽  
Autocorrelation Analysis ◽  
Market Returns ◽  
Stock Market Returns ◽  
Public Offerings ◽  
One Year ◽  
The Impact

The goal of this paper is to study the impact of stock markets on Initial Public Offerings (IPOs). Several studies have shown that the need for financing is not the main trigger for an IPOfavorable market conditions may play a more important part. This work prove the existence of a significate relationship between past stock market returns and the number of IPOs. Before setting the date for an IPO, managers analyze long term financial market yields, a bullish stock market over a six month/ one year period encourages IPOs activities. In the other hand, even a negative performance but over a two-year period may have the same effect. They expect a stock market inversion. These results were obtained by autocorrelation analysis and count regression.

scholarly journals DETERMINANTS OF THE CAPITAL STRUCTURE OF EUROPEAN FIRMS: THE MODERATING ROLE OF EFSF/ESM FINANCIAL ASSISTANCE PROGRAMS

2021 ◽  
Vol 17 (No.1) ◽  
pp. 81-108
Author(s):  
Georgios Chatzinas ◽  
Symeon Papadopoulos
Keyword(s):  
Capital Structure ◽  
Dynamic Panel Data ◽  
Financial Assistance ◽  
Debt Ratio ◽  
Assistance Programs ◽  
Tax Shield ◽  
Total Debt ◽  
Debt Tax Shield ◽  
The Impact ◽  
The Capital Structure

The present study has investigated the moderating effect of the European Financial Stability Facility (EFSF) / European Stability Mechanism (ESM) support to the firms’ indebtness. Using dynamic panel data, three models were estimated and aimed at the determination of the way that EFSF/ESM financial assistance programs could influence the impact of five firm-specific characteristics, namely growth, profitability, size, tangibility and non-debt tax shield on the capital structure of European firms. Data from 2,086 firms for the period 2003 – 2016 were used, and two dummy variables; one for the EFSF/ESM support period and one for any kind of economic crisis period were formed. The results indicated that pecking order prevailed over trade-off theory. Economic crises did not affect severely the firm-characteristics’ effects, but the EFSF/ESM programs influence appeared in three cases. During the period of EFSF/ESM assistance, profitability’s negative effect on long-term debt ratio disappeared and on total debt ratio strengthened, growth’s positive impact on total debt ratio diminished and non-debt tax shield acquired positive influence on total debt ratio. These changes might be explained by the increased levels of tax rates and decreased levels of uncertainty that the EFSF/ ESM programs caused, as well as by the reluctance of lenders to provide new funds.

scholarly journals Post IPO dynamics of capital structure on the Johannesburg Stock Exchange

2016 ◽  
Vol 47 (2) ◽  
pp. 23-31 ◽  
Author(s):  
C. Chipeta
Keyword(s):  
Capital Structure ◽  
Initial Public Offerings ◽  
Stock Exchange ◽  
First Year ◽  
Debt Ratio ◽  
Public Offerings ◽  
Speed Of Adjustment ◽  
Johannesburg Stock Exchange ◽  
Total Debt ◽  
Hot Market

This paper examines the dynamics of capital structure for firms engaging in initial public offerings (IPOs) on the Johannesburg Stock Exchange (JSE). Censored Tobit regressions are used to model capital structure targeting behaviour. The findings suggest evidence of targeting behaviour consistent with the static trade off theory of capital structure. On average, IPO firms adjust towards the capital structure target at a faster pace than seasoned firms; IPO firms take, on average, 0.77 years to cover half the financing gap, whereas seasoned firms take an average of 2.65 years. In the first year following the IPO, hot market IPOs significantly reduce their total debt, while cold market IPOs increase the total debt significantly. In terms of the total debt ratio, hot market IPOs adjust at a marginally faster pace than cold market IPOs. However, the opposite is true when the long term debt ratio is considered. In addition, hot market IPOs adjust faster than cold market IPOs in the first year following the IPO. The average first year adjustment speed of hot market IPO firms is 45.61 percent higher than the speed of adjustment for the average cold market IPO firm.

Capital Structure and Tax Status: New Evidence from IPOs

1994 ◽  
Vol 9 (2) ◽  
pp. 197-210 ◽  
Author(s):  
Robert E. Miller ◽  
Michael H. Morris ◽  
Kevin Scanlon
Keyword(s):  
Capital Structure ◽  
Initial Public Offerings ◽  
Public Offerings ◽  
Tax Incentive ◽  
Empirical Tests ◽  
Tax Status ◽  
New Evidence ◽  
The Capital Structure

Theory suggests that tax status should influence the capital structure policies of firms. Empirical tests, however, have not conclusively validated the theory. Recent research suggests that even if firms optimize their operations to take advantage of the deductibility of interest on debt, other steps taken previously or concurrently with leverage changes may obscure the effect that tax status has on capital structure. By conducting tests on a sample of younger firms with recent initial public offerings, we investigate the effect of tax status on capital structure. Evidence from this sample provides support for the tax-incentive hypothesis.

scholarly journals The Impact of Financial Crisis on the determinants of Capital Structure among Shariah Constructions Firms

2019 ◽  
Vol 4 (2) ◽  
pp. 46
Author(s):  
Mohamad Nizam Jaafar ◽  
Amirul Afif Muhamat ◽  
Norzitah Abdul Karim ◽  
Sharifah Faigah Syed Alwi ◽  
Noraini Binti Peie
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Firm Size ◽  
Free Cash Flow ◽  
Debt Ratio ◽  
Construction Firms ◽  
Construction Companies ◽  
Tangible Asset ◽  
The Impact ◽  
The Capital Structure

The aim of this empirical study is to explore the factors that affect the capital structure of construction firms and to investigate whether the capital structure models derived from Western settings provide convincing explanations for capital structure decisions of the Malaysia firms. This study focuses on Shariah compliant construction companies since this industry has been contributing significantly towards Malaysia economic growth. In addition, this study also includes the impact of financial crisis towards firms’ capital structure decision. Panel data from 11 Shariah compliant construction companies in Malaysia were analyzed for duration of 17 years (2001-2017). Different conditional theories of capital structure are reviewed i.e. trade‐off theory, pecking order theory, agency theory, and theory of free cash flow, in order to formulate testable propositions concerning the determinants of capital structure of the construction firms. The dependent variable that being used is debt ratio, while independent variables are firm size, profitability, tangible asset, growth opportunity, liquidity, and crisis respectively. Finding indicates that firm size, profitability and tangible asset are significant towards debt ratio. However, other variables including financial crisis did not have any significant impact on capital structure decision. The results of this study provide important implication to investors and manager of firms in making best decision on capital structure. This study also adds values to the existing knowledge regarding determinants of capital structure and financial crisis.

Capital structure of family firms: the effect of debt and equity market timing

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mushtaq Muhammad ◽  
Chu Ei Yet ◽  
Muhammad Tahir ◽  
Abdul Majid Nasir
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
South Asian ◽  
Family Firms ◽  
Market Timing ◽  
Content Type ◽  
The Family ◽  
Debt Market ◽  
The Impact ◽  
The Capital Structure

PurposeThis study aims to investigate how the timing behavior affects the capital structure decisions of South Asian family firms. A strand of literature is available based on the capital structure of firms in general but inconsistent with family businesses framework and not from market timing outlook. This study looks at the issues from the market timing perspectives of both equity and debt market timing.Design/methodology/approachThe sample of the study is the listed family firms of India, Pakistan and Bangladesh. The firm-level data are collected from Thomson Reuters' DataStream and the ownership data collected from the countries' stock exchanges and financial statements of the family firms.FindingsThe results show that there is strong support for the market timing in the family firms' capital structure. Moreover, the financial crisis of 2007–2009 surprisingly had a positive effect on the capital structure of South Asian family business.Originality/valueThis study looks at the issues from the market timing perspectives of both equity and debt market timing. It provides evidence for supporting the equity and debt market timing effect on the capital structure and financing decision of family firms. It also addresses the impact of the 2007–2009 financial crisis on the capital structure of family firms.

scholarly journals Fatores Determinantes para a Realização de Ofertas Iniciais de Ações (IPO) de Empresas Brasileiras

2014 ◽  
Vol 12 (2) ◽  
pp. 135 ◽  
Author(s):  
Bruno Cals de Oliveira ◽  
Roy Martelanc
Keyword(s):  
Logistic Regression ◽  
Stock Market ◽  
Capital Structure ◽  
Initial Public Offerings ◽  
Public Offerings ◽  
Significant Growth ◽  
Regression Methods ◽  
Determining Factors ◽  
Private And Public ◽  
The Capital Structure

The literature on Initial Public Offerings (IPO) is still little explored in Brazil, since the significant growth in the stock market occurred only recently. The purpose of this study is to identify the determining factors for the IPO of Brazilian companies, based on logistic regression methods and using a sample with private and public Brazilian companies. The results indicate that firms that undertook their IPO in the period were those that had been making significant investments, those that had the highest level of profitability and/or those that increased their level of indebtedness. The IPO was an alternative to improve the capital structure and/or raise funds to continue investing in their growth. The companies that went public were those that seized the opportunity offered in the period and the size of the companies was not significant for the IPO

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