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Capital structure and abnormal returns

Sivaprasad, Sheeja and Muradoglu, Yaz Gulnur (2012) Capital structure and abnormal returns. International Business Review, 21 (3). pp. 328-341. ISSN 0969-5931

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Official URL: http://dx.doi.org/10.1016/j.ibusrev.2011.03.007


This paper examines the relation between capital structure and abnormal returns for UK equities. A firm's industry matters when examining this relation. Abnormal returns decline in firm gearing, however, abnormal returns increase as the average industry gearing in a risk class increases. Separating the average level of external financing in an industry from that in a particular firm is important. This study focuses on industry characteristics. Firms in nonregulated and competitive industries with low concentration ratios exhibit this behavior. In contrast, in the utilities risk class, abnormal returns increase in firm gearing which is similar to the findings of Modigliani and Miller (1958) which was unique to the utilities sector.

Item Type:Article
Research Community:University of Westminster > Westminster Business School
ID Code:9238
Deposited On:11 Apr 2011 14:58
Last Modified:16 Jan 2013 15:12

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