Capital structure: a comparison between market-based and bank-based financial systems

This thesis explores the equity market timing effect on capital structure decisions in the U.K. which is considered a Market-based financial system and Germany which is regarded as a Bank-based financial system. In contrast with previous studies, we find no evidence supporting Market timing Theory in both countries. No significant and conclusive results are found to indicate that in the U.K. firms tend to issue equity when their market values are high whereas in Germany firms tend to have higher debt ratios.