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

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Title

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

Creator

  • Author: Chazi, Abdelaziz
    Creator Type: Personal

Contributor

  • Chair: Tripathy, Niranjan
    Contributor Type: Personal
    Contributor Info: Committee Chair
  • Committee Member: Conover, James
    Contributor Type: Personal
  • Committee Member: Siddiqi, Mazhar
    Contributor Type: Personal

Publisher

  • Name: University of North Texas
    Place of Publication: Denton, Texas

Date

  • Creation: 2004-08
  • Digitized: 2007-11-19

Language

  • English

Description

  • Content 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.

Subject

  • Library of Congress Subject Headings: Stock price forecasting.
  • Library of Congress Subject Headings: Capital.
  • Keyword: capital structure
  • Keyword: market timing

Collection

  • Name: UNT Theses and Dissertations
    Code: UNTETD

Institution

  • Name: UNT Libraries
    Code: UNT

Rights

  • Rights Access: public
  • Rights License: copyright
  • Rights Holder: Chazi, Abdelaziz
  • Rights Statement: Copyright is held by the author, unless otherwise noted. All rights reserved.

Resource Type

  • Thesis or Dissertation

Format

  • Text

Identifier

  • OCLC: 56722619
  • Archival Resource Key: ark:/67531/metadc4633

Degree

  • Degree Name: Doctor of Philosophy
  • Degree Level: Doctoral
  • Degree Discipline: Finance
  • Academic Department: Department of Finance, Insurance, Real Estate, and Law
  • Degree Grantor: University of North Texas

Note