Firms' Histories and Their Capital Structures / Ayla Kayhan, Sheridan Titman.

Format:

Book

Author/Creator:

Kayhan, Ayla.

Contributor:

National Bureau of Economic Research.

Titman, Sheridan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10526.

NBER working paper series no. w10526

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

This paper examines how cash flows, investment expenditures and stock price histories affect corporate debt ratios. Consistent with earlier work, we find that these variables have a substantial influence on changes in capital structure. Specifically, stock price changes and financial deficits (i.e., the amount of external capital raised) have strong influences on capital structure changes, but in contrast to previous conclusions, we find that their effects are subsequently at least partially reversed. These results indicate that although a firm's history strongly influence their capital structures, that over time, financing choices tend to move firms towards target debt ratios that are consistent with the tradeoff theories of capital structure.

Notes:

Print version record

May 2004.