IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v23y2013i6p495-504.html
   My bibliography  Save this article

Market value and corporate debt: the 2006--2010 international evidence

Author

Listed:
  • A. Dell’Acqua
  • L. L. Etro
  • E. Teti
  • P. Barbalace

Abstract

We analyse the differences in the financial debt level of firms both in market-oriented systems (the US, the UK) and bank-oriented systems (Germany, France and Italy) on a sample of 3360 listed companies between the period 2006 and 2010. Results indicate that the debt level is significantly higher in market-oriented systems when compared to the book value of equity. We find confirmation that Book-to-Market (BTM) cannot explain the debt level in bank-oriented systems but, contrary to reference literature, we observe that the BTM ratio has a negative influence on the debt level in market-oriented systems, especially in the United States. We claim different reasons to explain the evidence: (i) the financing standards of market-oriented countries, with an inflationary effect of market values on debt; (ii) an underlying activity for ownership protection and (iii) the unfavourable conditions of stock market over the years of the financial crisis that reduced the convenience of equity issuance.

Suggested Citation

  • A. Dell’Acqua & L. L. Etro & E. Teti & P. Barbalace, 2013. "Market value and corporate debt: the 2006--2010 international evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 23(6), pages 495-504, March.
  • Handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:495-504
    DOI: 10.1080/09603107.2012.730129
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/09603107.2012.730129
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/09603107.2012.730129?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stohs, Mark Hoven & Mauer, David C, 1996. "The Determinants of Corporate Debt Maturity Structure," The Journal of Business, University of Chicago Press, vol. 69(3), pages 279-312, July.
    2. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    3. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    4. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 309-340.
    5. Murray Z. Frank & Vidhan K. Goyal, 2009. "Capital Structure Decisions: Which Factors Are Reliably Important?," Financial Management, Financial Management Association International, vol. 38(1), pages 1-37, March.
    6. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Maksimovic, Vojislav, 2006. "The determinants of financing obstacles," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 932-952, October.
    7. Gaud, Philippe & Hoesli, Martin & Bender, Andre, 2007. "Debt-equity choice in Europe," International Review of Financial Analysis, Elsevier, vol. 16(3), pages 201-222.
    8. Öztekin, Özde & Flannery, Mark J., 2012. "Institutional determinants of capital structure adjustment speeds," Journal of Financial Economics, Elsevier, vol. 103(1), pages 88-112.
    9. de Jong, Abe & Kabir, Rezaul & Nguyen, Thuy Thu, 2008. "Capital structure around the world: The roles of firm- and country-specific determinants," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1954-1969, September.
    10. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    11. A. A. Bevan & J. Danbolt, 2004. "Testing for inconsistencies in the estimation of UK capital structure determinants," Applied Financial Economics, Taylor & Francis Journals, vol. 14(1), pages 55-66.
    12. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    13. Musumeci, Jim & Peterson, Mark, 2011. "BE/ME and E/P work better than ME/BE or P/E in regressions," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1272-1288.
    14. Michael Funke & Wolf Maurer & Holger Strulik, 1999. "Capital Structure and Labour Demand: Investigations Using German Micro Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(2), pages 199-215, May.
    15. Chen, Long & Zhao, Xinlei, 2006. "On the relation between the market-to-book ratio, growth opportunity, and leverage ratio," Finance Research Letters, Elsevier, vol. 3(4), pages 253-266, December.
    16. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    17. repec:bla:jfinan:v:43:y:1988:i:1:p:1-19 is not listed on IDEAS
    18. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    19. Hovakimian, Armen, 2006. "Are Observed Capital Structures Determined by Equity Market Timing?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(1), pages 221-243, March.
    20. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, February.
    21. Harris, Milton & Raviv, Artur, 1990. "Capital Structure and the Informational Role of Debt," Journal of Finance, American Finance Association, vol. 45(2), pages 321-349, June.
    22. Michael L. Lemmon & Michael R. Roberts & Jaime F. Zender, 2008. "Back to the Beginning: Persistence and the Cross‐Section of Corporate Capital Structure," Journal of Finance, American Finance Association, vol. 63(4), pages 1575-1608, August.
    23. Aydin Ozkan, 2000. "An empirical analysis of corporate debt maturity structure," European Financial Management, European Financial Management Association, vol. 6(2), pages 197-212, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Raja Zekri Ben Hamouda & Nessrine Hamzaoui & Faouzi Jilani, 2023. "Capital Structure Determinants: New Evidence from the MENA Region Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 144-163, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mai, Nhat Chi, 2012. "Market timing, taxes and capital structure: evidence from Vietnam," OSF Preprints t3mvs, Center for Open Science.
    2. Bontempi, Maria Elena & Bottazzi, Laura & Golinelli, Roberto, 2020. "A multilevel index of heterogeneous short-term and long-term debt dynamics," Journal of Corporate Finance, Elsevier, vol. 64(C).
    3. Antonczyk, Ron Christian & Salzmann, Astrid Juliane, 2014. "Overconfidence and optimism: The effect of national culture on capital structure," Research in International Business and Finance, Elsevier, vol. 31(C), pages 132-151.
    4. Li, Larry & Islam, Silvia Z., 2019. "Firm and industry specific determinants of capital structure: Evidence from the Australian market," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 425-437.
    5. Alter, Adrian & Elekdag, Selim, 2020. "Emerging market corporate leverage and global financial conditions," Journal of Corporate Finance, Elsevier, vol. 62(C).
    6. M. E. Bontempi & L. Bottazzi & R. Golinelli, 2015. "Dynamic corporate capital structure behavior: empirical assessment in the light of heterogeneity and non stationarity," Working Papers wp988, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Amini, Shahram & Elmore, Ryan & Öztekin, Özde & Strauss, Jack, 2021. "Can machines learn capital structure dynamics?," Journal of Corporate Finance, Elsevier, vol. 70(C).
    8. Ampenberger, Markus & Schmid, Thomas & Achleitner, Ann-Kristin & Kaserer, Christoph, 2009. "Capital structure decisions in family firms: empirical evidence from a bank-based economy," CEFS Working Paper Series 2009-05, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    9. Cai, Jie & Zhang, Zhe, 2011. "Leverage change, debt overhang, and stock prices," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 391-402, June.
    10. Ebrahim, M. Shahid & Girma, Sourafel & Shah, M. Eskandar & Williams, Jonathan, 2014. "Dynamic capital structure and political patronage: The case of Malaysia," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 117-128.
    11. San Martín, Pablo & Saona, Paolo, 2017. "Capital structure in the Chilean corporate sector: Revisiting the stylized facts," Research in International Business and Finance, Elsevier, vol. 40(C), pages 163-174.
    12. Iván Arribas & Emili Tortosa-Ausina & TingTing Zhu, 2021. "Optimal capital structure, model uncertainty, and European SMEs," Working Papers 2021/11, Economics Department, Universitat Jaume I, Castellón (Spain).
    13. Lee, Lillian & Chowdhury, Anup & Shubita, Moade, 2023. "Impact of Paris Agreement on financing strategy: Evidence from global FPSO industry," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    14. Belkhir, Mohamed & Maghyereh, Aktham & Awartani, Basel, 2016. "Institutions and corporate capital structure in the MENA region," Emerging Markets Review, Elsevier, vol. 26(C), pages 99-129.
    15. Viet Anh Dang, 2011. "Testing Capital Structure Theories Using Error Correction Models: Evidence From The Uk, France And Germany," Post-Print hal-00732527, HAL.
    16. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    17. Wu, Xueping & Au Yeung, Chau Kin, 2012. "Firm growth type and capital structure persistence," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3427-3443.
    18. Mohamed, Hisham Hanifa & Masih, Mansur & Bacha, Obiyathulla I., 2015. "Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 233-252.
    19. Krivogorsky, Victoria & Joh, Gun-Ho & DeBoskey, D.G., 2018. "The influence of supply side factors on firm's borrowing decisions: European evidence," Global Finance Journal, Elsevier, vol. 35(C), pages 202-222.
    20. İbrahim Yarba & Z. Nuray Güner, 2020. "Leverage dynamics: Do financial development and government leverage matter? Evidence from a major developing economy," Empirical Economics, Springer, vol. 59(5), pages 2473-2507, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:23:y:2013:i:6:p:495-504. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.