The role of stock market timing theory on the capital structure of companies active in the capital market: a case study of the electricity and power plant industry

Document Type : Original Article

Authors

yazdan gudarzi farahani ¹

Mansour Haghtalab ²

ghazal ghalvazi ³

Hamidreza hassanzadeh ⁴

¹ Assistant Professor, Department of Islamic Economics, Faculty of Economic and Administrative Sciences, University of Qom, Qom, Iran

² دکتری اقتصاد، پردیس ارس دانشگاه تهران

³ phd,student/qom university

⁴ PhD Student, Birjand Branch, Islamic Azad University, Birjand, Iran.

https://doi.org/10.22067/mfe.2024.83985.1325

Abstract

Capital structure has been one of the most important topics in modern financial theory. Financial resources can have both short-term and long-term effects on financial performance. The timing theory of the company market based on the stock price has specified the time of stock release. When the ratio of the market value to the book value of the company's shares is high, the management has issued shares. The purpose of this paper was to investigate the role of stock market timing theory on capital structure. Therefore, for this purpose, the effect of the company's past market values, fixed assets ratio, profitability and company size on the capital structure index has been evaluated. In this regard, statistical information has been used in the period of 2013-2021 and panel data method. The statistical sample of the research included companies active in the electricity industry and power plants. In this study, the capital structure of the company is considered based on the ratio of equity and changes. The results obtained from three fitted regression models show that the company's past values (the ratio of market value to book value) had a negative and significant effect on the capital structure, capital structure changes and share issuance. According to the obtained results, it is suggested that due to the dependence of the capital structure of the companies active in the electricity industry on the ratio of debt and bank financing, long-term and short-term planning in the financial sector of the company through the analysis of the market value of the company and Also, the profitability of the company should be done.

Keywords

Company market timing theory

capital structure

stock market

market value to book value

panel data

Subjects

• Capital markets

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