Market Timing of Corporate Debt Issuance: Prediction or Reaction?

Zhou, B.; Guo, M.; Chen, X.; Yang, T.

Abstract

This paper examines whether managers can successfully time the debt market when firms issue debt. The question arises from the debate about whether the empirical evidence that corporate debt issues are correlated to the debt market condition factors reveals the underlying market timing ability. The existence of a causal link between market condition variations and debt issuance is examined by distinguishing the predictions of future market variation from the reactions to past information. It is found that, in the sense of predicting the future market fluctuations, firms are generally unsuccessful. In contrast, their debt issue decisions are heavily driven by the reactions to prior information.

Citation

Zhou, B., Guo, M., Chen, X., & Yang, T. (2012). Market Timing of Corporate Debt Issuance: Prediction or Reaction?. Applied financial economics, 22(21), 1753-1769. https://doi.org/10.1080/09603107.2012.669460

• Journal Article Type: Article
• Online Publication Date: May 22, 2012
• Publication Date: 2012
• Deposit Date: Mar 9, 2012
• Journal: Applied Financial Economics
• Print ISSN: 0960-3107
• Electronic ISSN: 1466-4305
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 22
• Issue: 21
• Pages: 1753-1769
• DOI: https://doi.org/10.1080/09603107.2012.669460
• Public URL: https://durham-repository.worktribe.com/output/1510178