Market timing and corporate capital structure: a transatlantic comparison

This article provides comparative international evidence on the effect of market timing on corporate capital structures using panel data for US, UK and continental European firms. We document that the empirical regularity found for US firms, that historical market-to-book ratios and corporate leverage correlate negatively does not extend to UK and continental European firms. The latter tend to raise debt rather than equity when stock prices are high, thus sticking more closely to a pecking order in which debt is preferred over external equity.