Leverage Ratios, Industry Norms, and Stock Price Reaction: An Empirical Investigation of Stock-for-Debt Transactions
In this paper, I extend the stock-for-debt research by investigating whether stock value is influenced by how a firm changes its leverage ratio in relationship to its industry leverage ratio norm. I find that announcement-period stock returns for firms moving "away from" industry debt-to-equity norms are significantly more negative than returns for firms moving "closer to" these norms. This finding is consistent with optimal capital structure theory if industry debt-to-equity norms are reasonable approximations of wealth maximizing leverage ratios.
Year of publication: |
1999
|
---|---|
Authors: | Hull, Robert M. |
Published in: |
Financial Management. - Financial Management Association - FMA. - Vol. 28.1999, 2
|
Publisher: |
Financial Management Association - FMA |
Saved in:
Saved in favorites
Similar items by person
-
Insider ownership and other explanations for the market response to seasoned equity offerings
Hull, Robert M., (2010)
-
A capital structure model with growth
Hull, Robert M., (2010)
-
Explanation for market response to seasoned equity offerings
Hull, Robert M., (2010)
- More ...