Testing the Impact of Market Timing on the Romanian Firms’ Capital Structure

The purpose of this paper is to examine the influence of market timing on the Romanian firms’ capital structure. A descriptive analysis of market timing behaviour of the Romanian listed firms during the period 2000-2011 revealed a positive correlation between price-earnings ratio of the Romanian capital market and the number of the Romanian listed firms which are characterized by capital increase. In addition, using a panel data model, we showed that the effects of market timing on capital structure of the Romanian listed firms are not very persistent over the time. More specifically, the tendency of the Romanian listed firms to increase equity when their market values are high is not constant due to the influence of market conditions.