Advertisement

The Behaviour of the Financing Decision of the Russian Listed Companies

  • Bezhan RustamovEmail author
Conference paper
First Online:
Part of the Springer Proceedings in Business and Economics book series (SPBE)

Abstract

This study investigates the presence of the market timing theory in the case of Russian firms for the periods of 1992–2013 and 2003–2013 using the two-step system GMM panel estimators (Arellano and Bover in J Econ 68:29–51, 1995; Blundell and Bond in Econ Rev 19:321–340, 1998) and the Fama and MacBeth two-step procedure (Fama and MacBeth in J Polit Econ, 607–636, 1973). The main aim of the study is to observe the effect of the market timing on the capital structure by controlling the key determinants of firms’ financing decision. The two-step system GMM results imply that the calculated historical market to book measure has a negative coefficient and it indicates the presence of the market timing on capital structure. The persistence effect of market timing is confirmed by employing the Fama and MacBeth two-step procedure (Fama and MacBeth in J Polit Econ, 607–636, 1973). The result of the test reveals that even in 10 years the 55% persistency of the initial effect of the market timing on the capital structure for the matured listed Russian firms is observed.

Keywords

Capital structure Market timing GMM Tax 
This is a preview of subscription content, log in to check access.

References

  1. Alti, A. (2006). How persistent is the impact of market timing on capital structure? The Journal of Finance, 61(4), 1681–1710.Google Scholar
  2. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.Google Scholar
  3. Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51.Google Scholar
  4. Baker, M., & Wurgler, J. (2002). Market timing and capital structure. The Journal of Finance, 57(1), 1–32.Google Scholar
  5. Bayless, M., & Chaplinsky, S. (1996). Is there a window of opportunity for seasoned equity issuance? The Journal of Finance, 51(1), 253–278.Google Scholar
  6. Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143.Google Scholar
  7. Blundell, R., & Bond, S. (2000). GMM estimation with persistent panel data: an application to production functions. Econometric Reviews, 19(3), 321–340.Google Scholar
  8. Bruinshoofd, W. A., & De Haan, L. (2011). Is the negative relation between leverage and historical market-to-book specific to US and Information and Communication Technology Firms? International Review of Finance, 11(2), 227–243.Google Scholar
  9. Chen, A. (2009). Corporate governance in Russia and some points of comparison with China. Chinese Economy, 42(3), 41–59.Google Scholar
  10. Davidson, R., & MacKinnon, J. G. (2004). Econometric theory and methods (Vol. 5). New York: Oxford University Press.Google Scholar
  11. De Bie, T., & De Haan, L. (2007). Market timing and capital structure: Evidence for Dutch firms. De Economist, 155(2), 183–206.Google Scholar
  12. Fama, E. F., & MacBeth, J. D. (1973). Risk, return, and equilibrium: Empirical tests. The Journal of Political Economy, 607–636.Google Scholar
  13. Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society, 50(4), 1029–1054.Google Scholar
  14. Hayakawa, K. (2007). Small sample bias properties of the system GMM estimator in dynamic panel data models. Economics Letters, 95(1), 32–38.Google Scholar
  15. Hoechle, D. (2011). XTFMB: Stata module to execute Fama–MacBeth two-step panel regression. Statistical Software Components.Google Scholar
  16. Homaifar, G., Zietz, J., & Benkato, O. (1994). An empirical model of capital structure: some new evidence. Journal of Business Finance & Accounting, 21(1), 1–14.Google Scholar
  17. Hovakimian, A. (2006). Are observed capital structures determined by equity market timing? Journal of Financial and Quantitative Analysis, 41(1), 221–243.Google Scholar
  18. Högfeldt, P., & Oborenko, A. (2005). Does market timing or enhanced pecking order determine capital structure? European Corporate Governance Institute (ECGI) Research Paper, 24(72), 235–245.Google Scholar
  19. Huang, R., & Ritter, J. R. (2005). Testing the market timing theory of capital structure. Journal of Financial and Quantitative Analysis, 1, 221–246.Google Scholar
  20. Huang, R., & Ritter, J. R. (2006). Testing the market timing theory of capital structure. Working paper, University of Florida. Google Scholar
  21. Huang, R., & Ritter, J. R. (2009). Testing theories of capital structure and estimating the speed of adjustment. Journal of Financial and Quantitative Analysis, 44(02), 237–271.Google Scholar
  22. Ikenberry, D., Lakonishok, J., & Vermaelen, T. (1995). Market underreaction to open market share repurchases. Journal of Financial Economics, 39(2), 181–208.Google Scholar
  23. Kayhan, A., & Titman, S. (2007). Firms’ histories and their capital structures. Journal of Financial Economics, 83(1), 1–32.Google Scholar
  24. Korajczyk, R. A., Lucas, D. J., & McDonald, R. L. (1991). The effect of information releases on the pricing and timing of equity issues. Review of Financial Studies, 4(4), 685–708.Google Scholar
  25. Kraus, A., & Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. The Journal of Finance, 28(4), 911–922.Google Scholar
  26. Leary, M. T., & Roberts, M. R. (2005). Do firms rebalance their capital structures? The Journal of Finance, 60(6), 2575–2619.Google Scholar
  27. Loughran, T., Ritter, J. R., & Rydqvist, K. (1994). Initial public offerings: International insights. Pacific-Basin Finance Journal, 2(2), 165–199.Google Scholar
  28. Lucas, D. J., & McDonald, R. L. (1990). Equity issues and stock price dynamics. The Journal of Finance, 45(4), 1019–1043.Google Scholar
  29. Mahajan, A., & Tartaroglu, S. (2008). Equity market timing and capital structure: International evidence. Journal of Banking & Finance, 32(5), 754–766.Google Scholar
  30. Modigliani, F., & Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), 261–297.Google Scholar
  31. Modigliani, F., & Miller, M. H. (1963). Corporate income taxes and the cost of capital: A correction. The American Economic Review, 53(3), 433–443.Google Scholar
  32. Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574–592.Google Scholar
  33. Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187–221.Google Scholar
  34. Rajan, R. G., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50(5), 1421–1460.Google Scholar
  35. Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata journal, 9(1), 86–136.Google Scholar
  36. Sutela, P. (1998). The road to the Russian market economy: Selected essays, 1993–1998. Aleksanteri Institute.Google Scholar
  37. Taggart, R. A. (1977). A model of corporate financing decisions. The Journal of Finance, 32(5), 1467–1484.Google Scholar
  38. Vallandro, L. F. J., & Trez, G. (2015). Visão baseada em recursos, estratégia, estrutura e performance da firma: uma análise das lacunas e oportunidades de pesquisas existentes no campo da administração estratégica. Análise-Revista de Administração da PUCRS, 24(1), 79–81.Google Scholar
  39. Virk, M. U., Ahmed, J., & Nisar, S. (2014). Market timing theory and firms’ financing decisions in Pakistan: Evidence from non-financial firms. Journal of Economics Finance and Accounting, 1(4).Google Scholar
  40. Verbeek, M. (2008). A guide to modern econometrics. Wiley.Google Scholar
  41. Welch, I. (2004). Capital structure and stock returns. Journal of Political Economy, 112(1), 106–132.Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Department of Banking and FinanceEastern Mediterranean UniversityFamagustaTurkey
  2. 2.Faculty of Business and EconomicsRauf Denktas UniversityNicosiaTurkey

Personalised recommendations

Cite paper

Buy options