Market timing and the debt-equity choice

  title={Market timing and the debt-equity choice},
  author={W. Elliott and Johanna Ko{\"e}ter-Kant and Richard S. Warr},
We test the market timing theory of capital structure using an earnings-based valuation model that allows us to separate equity mispricing from growth options and time-varying adverse selection; thus avoiding the multiple interpretations of book-to-market ratio. We find that equity market mispricing plays a significant, if not dominant, role in the security choice decision. Our results are robust to the inclusion of proxies for time-varying growth options and alternate methods of measuring… CONTINUE READING

Figures, Tables, and Topics from this paper.

Explore Further: Topics Discussed in This Paper

Similar Papers

Loading similar papers…