Determinants of Target Capital Structure: The Case of Dual Debt and Equity Issues

40 Pages Posted: 20 Mar 2002

See all articles by Armen Hovakimian

Armen Hovakimian

Baruch College - Zicklin School of Business

Gayané Hovakimian

Fordham University, Gabelli School of Business

Hassan Tehranian

Boston College - Department of Finance

Abstract

We examine whether market and operating performance affect corporate financing behavior because they are related to target leverage. Our focus on firms that issue both debt and equity enhances our ability to draw inferences. Consistent with dynamic tradeoff theories, dual issuers offset the deviation from the target resulting from accumulation of earnings and losses. Our results also imply that high market-to-book firms have low target debt ratios. On the other hand, consistent with market timing, high stock returns increase the probability of equity issuance, but have no effect on target leverage.

Note: Previously Titled "Determinants of Target Capital Structure: The Case of Combined Debt and Equity Financing"

Keywords: Target leverage, target capital structure, debt issues, equity issues

JEL Classification: G30, G32

Suggested Citation

Hovakimian, Armen and Hovakimian, Gayané and Tehranian, Hassan, Determinants of Target Capital Structure: The Case of Dual Debt and Equity Issues. AFA 2003 Washington, DC Meetings. Available at SSRN: https://ssrn.com/abstract=302501 or http://dx.doi.org/10.2139/ssrn.302501

Armen Hovakimian (Contact Author)

Baruch College - Zicklin School of Business ( email )

One Bernard Baruch Way
Box B10-225
New York, NY 10010
United States
646-312-3490 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://zicklin.baruch.cuny.edu/faculty-profile/armen-hovakimian/

Gayané Hovakimian

Fordham University, Gabelli School of Business ( email )

Joseph A. Martino Hall
45 Columbus Ave
New York, NY 10023
United States
212-636-7021 (Phone)

Hassan Tehranian

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-3944 (Phone)
617-552-0431 (Fax)

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