Equity Market Timing and Capital Structure: Evidence from Indonesia Stock Exchange
Abstract: It is commonly known
that companies issue equity when the market values are high and repurchase when
the market values are low. Using the yearly financial statements from 2001
until 2015, with the exclusion of 2008, for 136 non-financial companies listed
on the Indonesia Stock Exchange (IDX), this study analyzed the existence of
equity market timing with the consideration of equity and debt market variables
using an econometric approach of panel data regression. This study adopted net
equity issues as dependent variable. For the independent variables, this study
adopted variables that reflect equity market condition: price-to-book value,
market, profitability, and debt market variable that is interest rate. This
study found that the variable affecting the net equity issues is profitability,
while price-to-book value, market, and interest are not found to have a
significant relationship with net equity issues. This shall imply that the
companies issue external equity when the companies' profitability is good
regardless of the valuation, and high interest rate. The findings of this study
supported the existence of equity market timing shown by the significant
relationship between variable profitability and net equity issues.
Keywords: Capital structure,
equity market timing, Indonesia, net equity issues, non-financial companies
Penulis: Sasha Dhita, Noer
Azam Achsani, Roy Sembel, Sugeng Purwanto
Kode Jurnal: jpmanajemendd180194
