Informative Value of Firm Capital Structure
| Author(s): | PhDr. Patrik Bauer Ph.D., PhDr. Vít Bubák, M.A., Ph.D., |
|---|---|
| Type: | Articles in journals with impact factor |
| Year: | 2003 |
| Number: | 3 |
| ISSN / ISBN: | |
| Published in: | Prague Economic Papers, 3/2003 |
| Publishing place: | |
| Keywords: | conditional capital structure theories, Ohlson valuation model, optimal capital structure, signalling theory |
| JEL codes: | G10, G32 |
| Suggested Citation: | |
| Abstract: | In this paper, the informative value of firm capital structure is analyzed. In the first part, a theoretical background regarding capital structure theories is presented. In the second (empirical) part, the Ohlson (1995) valuation framework is used in order to analyze the informative value of firm capital structure on a sample of data for the Czech (non-financial) companies. A contextual approach is adopted and the value relevance of debt is analyzed considering the signalling and the optimal capital structure theories. According to the results and in accordance with the optimal capital structure theory, debt is more penalized in case of the companies that deviate from the target debt level. Moreover, debt proves to be a positive signal for the firms with a higher earnings growth potential. This, in turn, is consistent with the signalling theory. |
