Timing of earnings and capital structure

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Abstract

This paper shows that asymmetric information about the timing of earnings can affect capital structure. It sheds new light on the following issues: why profitable firms may be interested in issuing equity and why debt does not necessarily signal a firm’s quality. These issues seem to be puzzling from the classical pecking-order theory or signalling theory point of view. The paper also contributes to the analysis of the link between capital structure choice and a firm’s expected performance (short-term and long-term). An empirical analysis confirms most of our theoretical results.
Original languageEnglish
Pages (from-to)1-15
Number of pages15
JournalNorth American Journal of Economics and Finance
Volume40
Early online date18 Jan 2017
DOIs
Publication statusPublished - Apr 2017

Keywords

  • Asymmetric information Pecking-order theory Signalling Timing of earnings

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