Equity Supply and Equity Market Timing on Capital Structure

2017 ◽  
Author(s):  
Cheng-Few Lee ◽  
MinnTeh Yu ◽  
Yang Zhao
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Equity Market ◽  
Equity Market Timing

Equity market timing and capital structure: evidence on post-IPO firms in Indonesia

2019 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dewi Ratih
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Equity Market ◽  
Content Type ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Short Run ◽  
Practical Implications ◽  
Equity Market Timing

Purpose The purpose of this paper is to analyze and evaluate the impacts of equity market timing on corporate capital structure policies in Indonesia by apply Baker and Wurgler’s analytical approach to firms in Indonesia to see, first, if that approach applies to Indonesian firms and, second, if it can be generalized to other emerging markets. Design/methodology/approach This study will focus on capital structure policies based on Market Timing Theory in developing countries, which uses the panel data of companies listed in Indonesian Stock Exchange after IPO. The companies used as research object are 70 firms in the non-financial/non-banking sector with the observation period of 2000–2015. The period of measurement is five years after IPO. Using a past market value in which equity market timing is measured in two-time measurements, i.e. yearly timing and long-term timing to prove its persistence. Findings Consistent with equity market timing theory, the results suggest that firms tend to issue equities when their market valuations are relatively higher than their book values and their past market values are high. As a consequence, the firms become underleveraged or have their debts reduced in the short run. The results of long-term measurement on equity market timing do not appear to affect the firms’ capital structure decisions due to the firms’ relatively quick adjustments of optimal capital structures. The conclusion is that equity market timing is an important element in the short run but not in the long run. Research limitations/implications The results of this study describe how firms in Indonesia take advantage of temporary market share fluctuations through equity market timing in their capital structure policies before ultimately making adjustments to the directions they are targeting. Practical implications The use of equity market timing is more aimed at reducing the debt ratio and avoiding unfavorable conditions in the debt market, as well as taking advantage of the capital gains derived from the differences in their stock prices. This study also has practical implications on investment policies that need to consider the adaptation factor of the industrial environment when it comes to making capital structure decisions, including how the entity must take policy when uncertain economic conditions. Social implications Through the research behavior of capital structure more in-depth decision is expected to provide an overview for investors widely in determining investment policy. Thus, the investment strategy is more planned and can also anticipate unexpected conditions. Originality/value This research is the first study to analyze and to evaluate the impacts of equity market timing on corporate capital structure policies on post-IPO firms in Indonesia. This research is an empirical study that investigates the relevance of equity market timing considerations in the determination of debt-equity choices in the capital structure, included in the conditions of the global financial crisis.

Equity Market Timing dan Struktur Modal

2016 ◽  
Vol 9 (2) ◽  
Author(s):  
Nidya Fahima ◽  
Sri Maemunah Soeharto ◽  
Chorry Sulistyowati
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Control Variable ◽  
Equity Market ◽  
Empirical Testing ◽  
Multiple Regressions ◽  
Dependent Variables ◽  
Negative Effect ◽  
Equity Market Timing

This study is an empirical testing of equity market timing and capital structure at firms which are doing IPO 2001 and 2002. The aims of this study are to test about the effect of equity market timing to capital structure and to test the persistency of the effect of equity market timing to firm’s capital structure in Indonesia. This study also used control variable, that asset tangibility, size and profitability. To analyze the data, this study used multiple regressions with SPSS 16.0 to test independent and dependent variables. The result suggest that the equity market timing has not significantly negative effect to the firms’ capital structure which used IPO 2001 and 2002 that are listed in BEI, and the effect of equity market timing to the firms’ capital structure are not persistent that the negative effect of equity market timing to the firms’ capital structure disappear within third years after IPO.

scholarly journals Equity Issue and a Long-Term Effect of Equity Market Timing on Capital Structure

2018 ◽  
Vol 7 (3.21) ◽  
pp. 82
Author(s):  
Miswanto Miswanto ◽  
. .
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Market Timing ◽  
Equity Market ◽  
Term Effect ◽  
Distributed Lag ◽  
Long Term Effect ◽  
Speed Adjustment ◽  
Equity Market Timing

After the research about a short term effect of equity market timing on capital structure, the author is motivated to do research about a long term effect of equity market timing on capital structure of the firms which is listed in Indonesia Stock Exchange. The main problems on this research are to understand whether firms use equity market timing theory when issuing equity, and whether equity market timing has a long term effect on its capital structure. Then the purpose of this study is to examine the problems of this research. There are two hypothesis in this research. First, firms use equity market timing when issuing equity, and second, equity market timing has a long term effect on capital structure of firms in Indonesia. This research uses non-financial companies listed on the Indonesia Stock Exchange over the period of 2001 to 2011 as the sample. The data used in this research are panel data. The sample choosing is based on sample non-probability sampling using purposive sampling in form of judgment sampling. The research model used in this study is a distributed-lag regression model. The results of this research show that firms use equity market timing when issuing equity, and equity market timing does not have a long term effect on capital structure of firms in Indonesia. Thus, because there is deviation on the capital structure, then there is an indication that the firms will perform the process of speed adjustment towards the targeted capital structure, the optimum capital structure. 

scholarly journals Analisis Equity Market Timing dan Struktur Modal

SKETSA BISNIS ◽  
2020 ◽  
Vol 7 (1) ◽  
pp. 45-55
Author(s):  
Acchedya Anugrahani ◽  
Rahmat Setiawan
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Stock Exchange ◽  
Market Timing ◽  
Weighted Average ◽  
Equity Market ◽  
Manufacturing Companies ◽  
Control Variables ◽  
External Finance ◽  
Equity Market Timing

Abstract This study aims to examine the effect of equity market timing in determining the company's capital structure decisions. The sample used was Indonesian manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2013-2018 period. This study uses independent variables namely market to book ratio and External finance weighted average market to book ratio (EFWAMTB), the dependent variable used is market leverage, and the control variables used are profitability, tangibility, and size. This study uses panel data regression. The results of this study indicate that the MTB ratio and EFWAMTB have a significant negative effect on market leverage. So it can be said that Indonesian manufacturing companies apply the equity market timing theory in determining capital structure decisions. The profitability and firm size control variables give significant negative and the tangibility variable shows significant positive results on the company's market leverage. Keywords: equity market timing, market to book ratio, market to book ratio dan External finance weighted average market to book ratio (EFWAMTB), ROA, tangibility, size and market leverage. Abstrak Penelitian ini bertujuan untuk menguji pengaruh equity market timing dalam menentukan keputusan struktur modal perusahaan.Sampel yang digunakan adalah perusahaan manufaktur Indonesia yang terdaftar di Bursa Efek Indonesia (BEI) periode 2013-2018. Strudi ini menggunakan variabel independen yaitu market to book ratio dan external finance weighted average market to book ratio (EFWAMTB), variabel dependen yang digunakan yaitu market leverage dan variabel kontrol yang digunakan adalah profitabilitas, tangibilitas dan size. Studi ini menggunakan regresi data panel.Hasil penelitian ini menunjukan bahwa MTB dan EFWAMTB berpengaruh negatif signifikan terhadap market leverage.Sehingga dapat dikatakan perusahaan manufaktur Indonesia menerapkan teori equity market timing dalam menentukan keputusan struktur modalnya. Variabel kontrol profitabilitas dan firm size memberikan hasil negatif signifikan dan untuk variabel tangibilitas menunjukan hasil positif signifikan terhadap market leverage prusahaan. Kata Kunci: equity market timing, market to book ratio, market to book ratio dan External finance weighted average market to book ratio (EFWAMTB), ROA, tangibility, size and market leverage

Are Observed Capital Structures Determined by Equity Market Timing?

2006 ◽  
Vol 41 (1) ◽  
pp. 221-243 ◽  
Author(s):  
Armen Hovakimian
Keyword(s):  
Capital Structure ◽  
Market Timing ◽  
Investment Decisions ◽  
Equity Market ◽  
Growth Opportunities ◽  
Market Conditions ◽  
Negative Relation ◽  
Financing And Investment ◽  
Equity Market Timing

AbstractContrary to Baker and Wurgler (2002), I find that the importance of historical average market-to-book ratios in leverage regressions is not due to past equity market timing. Although equity transactions may be timed to equity market conditions, they do not have significant long lasting effects on capital structure. Debt transactions exhibit timing patterns that are unlikely to induce a negative relation between market-to-book ratios and leverage. I also find that historical average market-to-book ratios have significant effects on current financing and investment decisions, implying that they contain information about growth opportunities not captured by current market-to-book ratios.

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