What drives security issuance decisions: Market timing, pecking order, or both?

Ming Dong, Igor Loncarski, Jenke ter Horst, Christianus Henricus Veld

Research output: Contribution to journalArticleResearchpeer-review

36 Citations (Scopus)


We study market timing and pecking order in a sample of debt and equity issues and share repurchases of Canadian firms from 1998 to 2007. We find that only when firms are not financially constrained is there evidence that firms issue (repurchase) equity when their shares are overvalued (undervalued) and evidence that overvalued issuers earn lower postannouncement long-run returns. Similarly, we find that only when firms are not overvalued do they prefer debt to equity financing. These findings highlight an interaction between market timing and pecking order effects.
Original languageEnglish
Pages (from-to)637 - 663
Number of pages27
JournalFinancial Management
Issue number3
Publication statusPublished - 2012
Externally publishedYes

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