Effect of market timing on capital costs and firm performance in securities issues

Market Timing Theory XXI. is a theory that has attracted attention in finance literature since the beginning of the century. The theory attempts to determine what motivates managers regarding the timing of issuing shares. Stock market timing refers to issuing shares during periods when the stock is overvalued or the market is hot and buying back from the market during periods when share market prices are low or the market is cold. Debt market timing refers to borrowing when interest rates are low or the market is hot and issuing debt when interest rates are high or the market is cold. The common goal of managers in both timings is to increase firm value by reducing the cost of capital and maximize shareholders' wealth. There is not much information in the literature about whether companies in the Turkish market engage in debt and equity market timing, or if they do, the capital cost of market timing and firm performance. In this context, three separate empirical studies were carried out to determine the existence of stock market timing, its effect on the cost of capital and firm performance, and the determinants of the existence and level of market timing. In the first empirical analysis, the existence and determinants of the existence and level of equity market timing in IPO and SEO issuances were identified. It has been determined that companies in Turkey time the stock market and that excessive prices, ownership structure and board structure are determining factors in timing. In the second empirical study, the existence of market timing in debt issuances and the determinants of its existence and level are analyzed. It has been determined that Turkish companies time the market in borrowing and the determinants of market timing consist of interest rate, inflation and managerial structure. In the third empirical study, the effect of the existence and level of equity and debt market timing on the cost of capital and firm performance was analyzed. According to the performance results obtained, an increase in the Tobin q variable, one of the accounting performance indicators and market performance indicators, was determined in IPO issues, an increase in market performance indicators in SEO issues, and an increase in market performance indicators in debt issues. As for the capital cost results; It has been determined that capital costs decrease in the presence of equity and debt market timing, while the cost of capital increases at the debt market timing level.