Which version of the equity market timing affects capital structure, perceived mispricing or adverse selection?

PDF Version Also Available for Download.

Description

Baker and Wurgler (2002) define a new theory of capital structure. In this theory capital structure evolves as the cumulative outcome of past attempts to time the equity market. Baker and Wurgler extend market timing theory to long-term capital structure, but their results do not clearly distinguish between the two versions of market timing: perceived mispricing and adverse selection. The main purpose of this dissertation is to empirically identify the relative importance of these two explanations. First, I retest Baker and Wurgler's theory by using insider trading as an alternative to market-to-book ratio to measure equity market timing. I also ... continued below

Creation Information

Chazi, Abdelaziz August 2004.

Context

This dissertation is part of the collection entitled: UNT Theses and Dissertations and was provided by UNT Libraries to Digital Library, a digital repository hosted by the UNT Libraries. It has been viewed 836 times , with 9 in the last month . More information about this dissertation can be viewed below.

Who

People and organizations associated with either the creation of this dissertation or its content.

Chair

Committee Members

Publisher

Rights Holder

For guidance see Citations, Rights, Re-Use.

  • Chazi, Abdelaziz

Provided By

UNT Libraries

With locations on the Denton campus of the University of North Texas and one in Dallas, UNT Libraries serves the school and the community by providing access to physical and online collections; The Portal to Texas History and UNT Digital Libraries; academic research, and much, much more.

Contact Us

What

Descriptive information to help identify this dissertation. Follow the links below to find similar items on the Digital Library.

Description

Baker and Wurgler (2002) define a new theory of capital structure. In this theory capital structure evolves as the cumulative outcome of past attempts to time the equity market. Baker and Wurgler extend market timing theory to long-term capital structure, but their results do not clearly distinguish between the two versions of market timing: perceived mispricing and adverse selection. The main purpose of this dissertation is to empirically identify the relative importance of these two explanations. First, I retest Baker and Wurgler's theory by using insider trading as an alternative to market-to-book ratio to measure equity market timing. I also formally test the adverse selection model of the equity market timing: first by using post-issuance performance, and then by using three measures of adverse selection. The first two measures use estimates of adverse information costs based on the bid and ask prices, and the third measure is based on the close-to-offer returns. Based on received theory, a dynamic adverse selection model implies that higher adverse information costs lead to higher leverage. On the other hand, a naïve adverse selection model implies that negative inside information leads to lower leverage. The results are consistent with the equity market timing theory of capital structure. The results also indicate that a naïve, as opposed to a dynamic, adverse selection model seems to be the best explanation as to why managers time equity issues.

Subjects

Keywords

Library of Congress Subject Headings

Language

Identifier

Unique identifying numbers for this dissertation in the Digital Library or other systems.

Collections

This dissertation is part of the following collection of related materials.

UNT Theses and Dissertations

Theses and dissertations represent a wealth of scholarly and artistic content created by masters and doctoral students in the degree-seeking process. Some ETDs in this collection are restricted to use by the UNT community.

What responsibilities do I have when using this dissertation?

When

Dates and time periods associated with this dissertation.

Creation Date

  • August 2004

Added to The UNT Digital Library

  • Feb. 15, 2008, 3:29 p.m.

Description Last Updated

  • Jan. 14, 2014, 3:02 p.m.

Usage Statistics

When was this dissertation last used?

Yesterday: 0
Past 30 days: 9
Total Uses: 836

Interact With This Dissertation

Here are some suggestions for what to do next.

Start Reading

PDF Version Also Available for Download.

Citations, Rights, Re-Use

Chazi, Abdelaziz. Which version of the equity market timing affects capital structure, perceived mispricing or adverse selection?, dissertation, August 2004; Denton, Texas. (digital.library.unt.edu/ark:/67531/metadc4633/: accessed September 23, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; .