No abstract

This paper examines capital structure decisions in the 1990s. We test a number of capital structure theories and find notable differences between investment-and junk-grade issuers in this period. Consistent with the trade-off theory, 67% of junk-grade issues were equity as opposed to only 9% of investment-grade issues. In addition, consistent with the trade-off theory, for junk-grade issuers, we find a direct relationship between collateral and debt issuance and an inverse relationship between debt issuance and the treasury yield. However, contrary to the predictions of the trade-off theory, we do not find similar evidence for investment-grade issuers. Moreover, our analysis suggests that junk-grade issuers are concerned with the wealth-transfer consequences of choosing equity over debt; this does not seem to be the case for investment-grade issuers. We find some evidence in support of market timing and little evidence for the pecking order theory or the equity undervaluation hypothesis.

Purpose -The purpose of this paper is to investigate the impact of Jewish holidays on US stock market returns. Design/methodology/approach -The authors use event study and regression methodology to determine abnormal returns on Jewish holidays and windowed periods surrounding the day. In order to seclude the results to Jewish holidays, the authors control for several other known events that impact stock market returns. To substantiate claims of abnormal returns, the authors also use the Fama-French four-factor model to seek alpha and evidence returns on Jewish holidays. Findings -This study shows, during the 1990-2009 period, an increase in average daily returns 32 times greater on nine Jewish holidays than on the other trading days of the year. The demeanor of the specific Jewish holidays also influences stock market returns, as the market returns increase (decrease) on the joyous (solemn) Jewish holidays. Also, individual investors, rather than institutional investors, are a greater catalyst for the increased returns. Originality/value -Previous research details increased stock market returns on US holidays and several other events. However, no definable research exists on stock market returns on Jewish holidays. The findings in this paper are valuable to investors who event-trade, and are also valuable to investors and behavioral-finance researchers who seek to understand how demeanor and moods may impact buying/selling decisions.

If outstanding debt is risky, issuing equity transfers wealth from equity holders to debt holders. If existing leverage is high and bankruptcy costs are small, this wealth transfer effect outweighs the gains to stockholders from optimizing firm value. Empirically, we find that for investment‐grade firms, higher leverage implies a greater likelihood of issuing equity, as expected in a standard tradeoff model. However, consistent with the impact of wealth transfer effects, for junk‐grade firms, higher leverage implies a greater likelihood of issuing debt. The analysis implies an additional route through which historical shocks determine firms’ financing choices.

Throughout history, Chinese zodiac astrology has significantly influenced the way people in that area think, feel, or make daily decisions. In the zodiac calendar, each year is marked by one of twelve symbolic animals and each animal is associated with its own specific traits. Previous literature suggests investors' mood, attitude, and behavior are influenced by natural events such as cloudy or sunny weather, or lunar cycles. Cultural events such as holidays or religious feasts are also shown to have impact on investing decisions. In this paper we study the stock market returns in different lunar years in the zodiac calendar. We find that Hang Seng's mean returns are higher in Rat years and both mean and median returns are lower in Snake years. These results are statistically significant despite a small sample size. For S&P 500, only Snake and Rooster years show lower, statistically significant, holding period return. Results are inconclusive for other animal-years or other categorizations in the zodiac astrology.