Research paper from Prof. Raju Majumdar got selected at IIM Calcutta.

IWSB congratulates Prof. Raju Majumdar (Faculty Finance, IWSB) on this wonderful achievement.  The abstract of the research paper is given below. The paper will be presented in International Finance Conference to be held at IIM Calcutta from 9th to 12th January.

Abstract:-

Agency, Asymmetric Information and Market Timing Theories of Capital Structure: A Reinterpretation of the Relation Between Growth and Corporate Borrowing

Financing growth opportunities is one among the biggest challenges that a firm face. Corporate finance theory, based on agency conflicts and asymmetric information issues predicts an inverse relation between the two; empirical analysis of firm’s borrowing behavior also corroborates the assertion of theory.This paper develops an alternative interpretation of the observed inverse relation based on the market timing theory of capital structure and provides empirical evidence to substantiate the claim that incorporating growth in terms of market-to-book ratio does in fact measure alternative theories that have varied interpretations based on firm specific micro factors as well as macro economic factors. Consequently, in order to devise a conclusive and non-overlapping test of theory there is an urgent need to revisit the issue of firm growth and its estimation, as well as reinterpret existing findings in the light of our findings.