Impact of Market Timing on the Capital Structure of Russian Companies

Journal of Economics and Business. 2017. No. 92. P. 10–28.

Nechaeva I., Zavertiaeva M. A.

Prior research on market timing theory in relation to developing markets only analyzes equity issuance and provides contradictory results. Using a sample of large Russian companies in nonfinancial sectors between 2008 and 2015, this paper analyzes both equity and debt market timing to explore the impact of market timing on firms’ capital structure. To test the robustness of the results, we use several proxies for both timing types and include Russian-specific control variables of corporate governance and ownership. The results show that Russian companies time the debt market to attract extra capital if the value of the interest rate in the current period is lower than the rates in previous periods. The net debt issued decreases when interest rates are high, which indicates debt market timing. Consistent with previous studies, we find that Russian companies do not time the equity market. Added corporate governance factors suggest that younger boards of directors prefer debt financing to equity issuance, as well as more experienced ones. State ownership is negatively connected with leverage.

Keywords: корпоративное управление, государственная собственность, corporate governance, структура капитала, развивающиеся рынки капитала, state ownership, leverage, emerging markets, debt timing, equity timing, отслеживание рынка

Publication based on the results of: Конкурентоспособность российских компаний в условиях необходимости импортозамещения: роль интеллектуальных ресурсов (2015)