Market Timing and Firms’ Financing Choice
Halil D. Kaya

Abstract
This study examines the effects of equity market timing and debt market timing on a firm’s financing choice. Using a comprehensive sample of U.S. equity offerings, public debt offerings, private placements/144a issues, and syndicated bank loan agreements, I find that equity market timing is an important determinant of a firm’s choice between equity financing and private placement/144a financing, and also between equity financing and syndicated loan financing. When the equity market is “Hot”, firms tend to choose equity financing over private placement/144a financing, but interestingly, they tend to choose syndicated loan financing over equity financing. This result implies that when the equity market is “Hot”, the syndicated loan market becomes even hotter. On the other hand, I find that debt market timing is not a determinant of a firm’s financing choice. The change in the yields does not explain a firm’s choice between equity financing and debt financing.

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