| Testing the Market Timing Theory of Capital Structure: the Effect of Controlling Shareholders |
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Jaeuk Khil, Yu Kyung Lee, Eun Jung Lee |
| 한국 기업의 자본조달과 마켓타이밍에 관한 연구 |
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길재욱, 이유경, 이은정 |
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| Abstract |
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This paper examines market timing in equity issuance of the listed companies controlled by large shareholders in Korea between 1993 and 2011. The controlling shareholders have incentives to issue the shares when the stock price is overvalued, since the overall value of the controlling shareholders increases. However, this argument is particularly true in cases of equity issuance with dilution of the controlling shareholder. In this paper, we examine return predictability after equity issuance based on the ownership of the controlling shareholders. We find that returns following issuances are poor, which supports market timing theory, only when the controlling shareholder`s stake is reduced. We argue that it is another form of opportunistic behavior by controlling shareholders in Korea. In addition, we find an increase of market timing behavior of the controlling shareholders when the firm has severe information asymmetry and there is the irrationality of investors. Finally, taking into account the corporate governance, we also find an increase of opportunistic behavior of the controlling shareholders when the firm has weak corporate governance. |
| Key Words:
마켓타이밍이론,자본구조,정보비대칭,지배주주,투자자의 비합리성,Capital Structure,Controlling Shareholder,Corporate Governance,Information Asymmetry,Market Timing Theory |
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