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The Dynamics of External Financing

Author

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  • Jansson, Joakim

    (Department of Economics)

Abstract

A dynamic process underlying firms' discrete financial choices has previously been found, but without controlling for unobserved heterogeneity, this dependence can either be of a "true" nature or an effect of firm-specific characteristics that we cannot observe. This study extends previous research focusing on firms' discrete external financing decision by adapting a model by Honoré and Kyriazidou (2000), which accommodates both fixed effects and a lagged dependent variable, which makes it possible to establish the nature of the dependence. We find that there is a smoothing of financing, even after controlling for unobserved heterogeneity, and also that unobserved heterogeneity plays a significant explanatory role.

Suggested Citation

  • Jansson, Joakim, 2000. "The Dynamics of External Financing," Working Paper Series 2000:8, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2000_008
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    References listed on IDEAS

    as
    1. Bayless, Mark, 1994. "The Influence of Predictability on Differences in the Market Reaction to Debt and Equity Issue Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(1), pages 117-131, Spring.
    2. Alan J. Auerbach, 1985. "Real Determinants of Corporate Leverage," NBER Chapters, in: Corporate Capital Structures in the United States, pages 301-324, National Bureau of Economic Research, Inc.
    3. Mark Bayless, 1994. "The Influence Of Predictability On Differences In The Market Reaction To Debt And Equity Issue Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 17(1), pages 117-131, March.
    4. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
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    More about this item

    Keywords

    Corporate finance; Discrete choice; State dependence;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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