MARKET TIMING THEORY AND FIRMS’ FINANCING DECISIONS IN PAKISTAN: EVIDENCE FROM NON-FINANCIAL FIRMS

Yıl 2014, Cilt: 1 Sayı: 4, 0 - 0, 16.10.2015

Muhammad Usman Virk Jaleel Ahmed Shoaib Nisar

Öz

This study fills a gap in capital structure literature by identifying conditions and mechanisms of equity markets that make Pakistani firms financing decisions more relevant and predictable. This study used the data of 104 non-financial firms listed at Karachi Stock Exchange for the period of 1999 to 2011 to identify that either firms in Pakistan time the equity markets or this phenomena is flat. The core principle of market timing theory that firms go for issuance of securities when their prices are high in the market has been observed in this study. The study found the evidence that in short run firms consider the market valuations if going to issue equity however the results lost the economic significance when test of persistence were applied. In short, our results developed the concept that firm in Pakistan may consider the market timing effect to change their capital structure decisions.

Anahtar Kelimeler

Market timing theory, capital structure, nonfinancial firms, KSE, leverage

Kaynakça

• Alti, A. (2006). How Persistent is the Impact of Market Timing on Capital Structure? Journal of Finance, 61(4), 1681-1710.
• Alti, A., & Sulaeman, J. (2012). When do high stock returns trigger equity issues? Journal of Financial Economics, 103, 61-87.
• Antoniou, A., Guney, Y., & Paudyal, K. (2008). The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions. Journal of Financial and Quantitative Analysis, 43, 59–92.
• Baker , M., & Wurgler, J. (2002). Market Timing and Capital Structure. Journal of Finance, 57(1), 1-32.
• Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital Structures in Developing Countries.
• The Journal of Finance, 56, 87-130. Dellavigna, S., & Pollet, J. M. (2013). Capital Budgeting versus Market Timing: An Evaluation Using Demographics.
• The Journal of Finance, 68, 237-270. Fama, E. F., & French, K. R. (1992). The Cross Sections of Expected Stock Returns. The Journal of Finance, 42, 427- 4
• Fama, E. F., & French, K. R. (2005). Financing decisions: who issues stock? Journal of Financial Economics, 76, 549-5
• Faulkender, M., & Petersen, M. A. (2006). Does the Source of Capital Affect Capital Structure? The Review of Financial Studies, 19, 45-79.
• Graham, J. R., & Harvey, C. R. (2001). The Theory and Practice of Corporate Finance:Evidence from the field.
• Jouranl of Financial Economics, 60, 187-243. Hovakimian, A. (2004). The Role of Target Leverage in Security Issues and Repurchases. The Journal of Business, 77, 1041-1072.
• Hovakimian, A., Hovakimian, G., & Tehranian, H. (2006). Determinants of target capital structure: The case of dual debt and equity issues. Journal of Financial Economics, 71, 517–540.
• Jenter, D. (2005). Market Timing and Managerial Portfolio Decisions. Journal of Finance, 60(4), 1903-1949.
• Larrian, B., & I., F. U. (2013). Controlling Shareholders and Market Timing in Share Issuance. Journal of Financial Economics, 109, 661-681.
• Lemmon, M. L., Roberts, M. R., & Zender, J. F. (2008). Back to the Beging: Persistance and the Cross-Sections of
• Corporate Capital Sturcture. Journal of Finance, 63(4). Lucas, D. J., & McDonald, R. L. (1990). Equity Issues and Stock Prices Dynamics. Journal of Finance, 45(4), 1019- 10
• Mahmud, M. (2003). The Relationship between Economic Growth and Capital Structure of Listed Companies:
• Evidence of Japan, Malaysia, and Pakistan. The Pakistan Development Review, 42(4), 727-750. Mayers, S. C. (1984). The Capital Structure Puzzle. Journal of Finance, 39(3), 575-592.
• Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review, 48, 261-297.
• Rafiq, M., Iqbal, A., & Atiq, M. (2008). The Determinants of Capital Structure of the Chemical Industry in Pakistan.
• The Lahore Journal of Economics, 13(1), 139-158. Rajan, R. G., & Zingales, L. (1995). What Do We Know about Capital Structure? Some Evidence from International
• Data. The Journal of Finance, 1421-1460.
• Sheikh, N. A., & Wang, Z. (2011). Determinants of Capital Structure An empirical study of firms in manufacturing industry of Pakistan. Managerial Finance, 37(2), 117-133.
• Shah, A., & Hijazi, T. (2004). The Determinants of Capital Structure of Stock Exchange-listed Non-financial Firms in
• Pakistan. The Pakistan Development Review, 43(4), 605-618. Shah, A., & Khan, S. (2007). Determinants of Capital Structure: Evidence from Pakistani Panel Data. International
• Review of Business Research Papers, 3(4), 265-282. Titman, S., & Wessels, R. (1988). The Determinants of Capital Structure Choice. The Journal of Finance, 43, 1-19.