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The Impact of Market Timing on Canadian and U.S. Firms' Capital Structure

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  • Zhaoxia Xu

Abstract

This paper studies the impact of market timing on Canadian firms' capital structure and makes a comparison with U.S. firms. There is no evidence that market timing affects Canadian firms' capital structure in the same manner as it affects their U.S. counterparts. The effect of past equity issues on Canadian firms' capital structure is transitory. Canadian firms adjust at a faster rate toward the leverage target than U.S. firms. These results challenge the generality of the market-timing theory of capital structure.

Suggested Citation

  • Zhaoxia Xu, 2009. "The Impact of Market Timing on Canadian and U.S. Firms' Capital Structure," Staff Working Papers 09-1, Bank of Canada.
    • Handle: RePEc:bca:bocawp:09-1
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    Cited by:

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    2. Mai, Nhat Chi, 2012. "Market timing, taxes and capital structure: evidence from Vietnam," OSF Preprints t3mvs, Center for Open Science.
    3. Sulagna Mukherjee & Jitendra Mahakud, 2012. "Historical Market-to-Book Ratio and Corporate Capital Structure: Evidence from India," Global Business Review, International Management Institute, vol. 13(2), pages 339-350, June.

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    More about this item

    Keywords

    Financial markets; International topics;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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