TY - JOUR
T1 - Capital structure and stock returns
T2 - Evidence from an emerging market with unique financing arrangements
AU - Al-Yahyaee, Khamis H.
AU - Pham, Toan M.
AU - Walter, Terry S.
N1 - Publisher Copyright:
© 2013 Taylor & Francis.
PY - 2013/12/1
Y1 - 2013/12/1
N2 - We investigate capital structure dynamics in a unique financing environment where (1) we avoid the complex tax environments faced by previous studies and where (2) firms rely primarily on bank loans rather than the public debt market.Consistent with recent empirical evidence, we find that stock returns are a first-order determinant of capital structure. Firms show some tendency to rebalance towards their target capital structure. However, the impact of stock returns dominates the effects of rebalancing. We also find that firm's stock returns induce some corporate issuing activity, and managers use issuing activity to counteract some of the mechanistic effects of stock returns.
AB - We investigate capital structure dynamics in a unique financing environment where (1) we avoid the complex tax environments faced by previous studies and where (2) firms rely primarily on bank loans rather than the public debt market.Consistent with recent empirical evidence, we find that stock returns are a first-order determinant of capital structure. Firms show some tendency to rebalance towards their target capital structure. However, the impact of stock returns dominates the effects of rebalancing. We also find that firm's stock returns induce some corporate issuing activity, and managers use issuing activity to counteract some of the mechanistic effects of stock returns.
KW - Bank debt
KW - Capital structure dynamics
KW - Issuing activity
KW - Oman
KW - Stock returns
UR - http://www.scopus.com/inward/record.url?scp=84912075742&partnerID=8YFLogxK
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U2 - 10.1080/09603107.2013.799754
DO - 10.1080/09603107.2013.799754
M3 - Article
AN - SCOPUS:84912075742
SN - 0960-3107
VL - 23
SP - 1197
EP - 1203
JO - Applied Financial Economics
JF - Applied Financial Economics
IS - 14
ER -