A Study on Taiwan Listed Company Capital Structure Decision:Perspective of Myopia Behavior

• Main Authors: Ko Yu Lin, 柯郁琳
• Other Authors: Wen Yue Fang
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/45822016857729653411

碩士 === 國立宜蘭大學 === 應用經濟學系碩士班 === 97 === Rational decision-making of human is supposed by traditional financial theories, but the assumption diverges from reality. Assumed by the school of behavioral finance, people constrained by psychology-level factors make decisions with aberration when they are facing uncertainty. In this case, people make decisions with limited rationalities and they are not completely rational. Therefore, irrational behavior might exist in corporate decisions that influence the firm value. This paper adopts the viewpoint of behavioral finance to discuss whether the irrational behavior of myopia is existent when managers are making decisions about capital structure. This study uses regression analysis to verify the myopic behavior and its influence on firm value. With the data of Taiwan listed companies between 2003 and 2007, this study selects Tobin’s Q (dependent variable) as the proxy variable to represent the firm value and uses debt ratio, long-term debt ratio, short-term debt ratio, the interaction item of short term and long term debt ratios, and a dummy variable of the usage of long-term debt as explanatory variables. Besides, this study adopts Return on Assets (ROA), earning per share(EPS), operating income rate, revenue growth rate, operating income growth rate, rate of return on total asset, net value growth ratio, the interest earning ratio, long finance ratio, receivables turnover ratio, inventory turnover ratio, financial leverage, operating leverage, firm size, industry and Misery Index as control variables to control their influence on firm value, such as profit strength, growth strength, asset management, risk, firm size, industry, and macro environment. The result shows that the myopic behavior, short-term debt substituting long-term debt, is existent in corporate leverage decisions. When firms purely use short-term debt, the firm value in the short time might be larger than the one of who use long-term debt, but the potential costs of bankruptcy and agency are higher accordingly. In addition, there is trade-off between short-term debt and long-term debt when firms are facing different levels of short-term and long-term interest rates. After considering the influence of short-term debt ratio, long-term debt, and their interaction item on firm value, this study finds that short-term debt ratio is significantly negatively correlated with firm value and the interaction item is positively associated with firm value, implying the positive relationship between long-term debt ratio and firm value.