Finance



Finance

The paper “How Persistent Is the Impact of Market Timing on Capital Structure?” analyze about the capital structure and its implication on market timings. The author of paper isolates the timing attempts in a single major financing event, which is the Initial Public Offering (IPO). The research is based on the identification of firms that goes for initial public offering in hot issue markets and analyzes the timing of the market. The research analyzed that firms makes more profits and lower their leveraging ratios when they go for Initial Public Offering (IPO) in hot market firms, than the firms who goes in cold market firms. However, the firms who entered into the hot market for initial public offering, immediately increases their leverage ratios by issuing more debts and lessen the equity ratio in comparison to cold market firms. Finally, the paper discusses about the timing of market completely vanishes out the leverage, after the subsequent year of initial public offering. In this paper I will be discussing about the understanding of particular issues related to the research “How Persistent Is the Impact of Market Timing on Capital Structure?”, Secondly, I will briefly summarize the methodology (theoretical or empirical) used by the authors to achieve their objectives.

Elaborate how the paper advanced understanding of the particular issues

The paper describes the efficient impact of market timings on the capital structure of the firm. In corporate finance capital structure defines the way a ' firm finances its investments through some combination of debt, venture capital or equity or by financials of a mixed nature. The paper focuses on the understanding of capital structure and the leverage ratios. For instance, a company whose capital is composed of $20 million of venture capital and $80 million of debt. Then the capital structure suggest that the company ...