Issuing and repurchasing: The influence of mispricing, corporate life cycle and financing waves

This paper examines the impact of mispricing, corporate life cycle, and financing waves on the debt/equity decision when firms (1) acquire funds and (2) repurchase funds by using a large international data set from 47 countries for the period 1984–2006. Our results support the mispricing hypothesis and the corporate life cycle hypothesis for both the acquisition of new funds and the repurchase of funds. However, our findings are consistent with the financing wave hypothesis only for repurchases of firms residing in common law countries as well as market-based countries.

► We examine the impact of mispricing, corporate life cycle, and financing waves on the debt/equity decision when firms (1) acquire funds and (2) repurchase funds.
► We use a large international data set from 47 countries for the period 1984–2006.
► We also investigate whether these hypotheses hold in different legal regimes and different financial structures.
► Our results provide evidence consistent with mispricing and corporate life cycle.
► We find some evidence for the financial wave hypothesis but only for repurchasing decisions in common law and market-based countries.