Timing of Earnings and Capital Structure

Miglo, Anton (2014): Timing of Earnings and Capital Structure.

Abstract

This paper shows that asymmetric information about the timing of earnings can affect corporate capital structure. It sheds some new light on two following questions: why may profitable firms be interested in issuing equity, and why does debt not necessarily signal a firm quality. These issues seem to be puzzling from the classical pecking-order theory or signalling theory point of view. The paper also contributes to the analysis of the link between debt-equity choice and subsequent performance after issue (short-term versus long-term) which has been widely discussed in empirical literature but did not get enough attention in theoretical research.

• Item Type: MPRA Paper
• Language: English
• Keywords: Asymmetric information, Pecking-order theory, Signalling, Timing of earnings
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory; D - Microeconomics > D9 - Intertemporal Choice > D92 - Intertemporal Firm Choice, Investment, Capacity, and Financing; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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