Does equity market timing have a persistent impact on capital structure? Evidence from China

Yang Zhao, Cheng Few Lee, Min Teh Yu

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

This paper uses the change in individual securities accounts as a measure of equity funding supply to examine whether the persistent timing effect on capital structure exists for the Chinese equity market. This new equity timing measure avoids previous criticisms over a timing measure not being independent of a firm's characteristics of capital structure. Our empirical results show that this new measure is an effective market timing variable for issuing equity in the Chinese equity market, and that a persistent effect of equity market timing on firm capital structure exists for more than 7 years. This paper offers evidence that the market conditions of equity funding supply play an important role in corporate financing decisions in China.

Original languageEnglish (US)
Article number100838
JournalBritish Accounting Review
Volume52
Issue number1
DOIs
StatePublished - Jan 2020

All Science Journal Classification (ASJC) codes

  • Accounting

Keywords

  • Capital structure
  • Chinese IPO
  • Cost of equity
  • Equity funding supply
  • Equity market timing
  • Securities accounts

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