International Journal of Computational Intelligence Systems

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Volume 12, Issue 2, 2019, Pages 1282 - 1294

Artificial Neural Network to Model Managerial Timing Decision: Non-linear Evidence of Deviation from Target Leverage

Authors
Hafezali Iqbal Hussain1, *, Fakarudin Kamarudin2, Hassanudin Mohd Thas Thaker3, Milad Abdelnabi Salem4
1Taylor's Business School, Taylor's University, Subang Jaya 47500, Selangor, Malaysia
2Faculty of Economics and Management, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia
3Department of Economics and Finance, Sunway University Business School, Sunway University, Bandar Sunway, 47500 Petaling Jaya, Selangor, Malaysia
4Business Department, Community College of Qatar, 9740 Doha, Qatar
*Corresponding author. Email: hafezali.iqbalhussain@taylors.edu.my
Corresponding Author
Hafezali Iqbal Hussain
Received 27 May 2019, Accepted 14 August 2019, Available Online 12 November 2019.
DOI
10.2991/ijcis.d.191101.002How to use a DOI?
Keywords
Capital structure; Market timing; Multiple regression model; Artificial neural network
Abstract

The current study highlights the utilization of a non-linear model to analyze an important decision-making process in the study of corporate finance where managers are deciding on the capital structure of a firm. This study compares the results from based on the unbalanced panel data multiple regression for firm fixed effects relative to the artificial neural networks, i.e., ANN, with known determinants of capital structure as control variables for a sample of UK firms respectively. Results of the study show that firms are timing away from target levels which challenges the current findings in the literature. The ANN model achieves a better fit based on the root of mean-squared error (RMSE) values which provides a more accurate forecast. Thus, the nature of balancing between cost of being off-target versus benefits gained from timing the equity market is non-linear and which is captured by ANN. Implications from the study allow market players to understand the process of achieving optimal capital structure to maximize firm value and thus benefit all stakeholders.

Copyright
© 2019 The Authors. Published by Atlantis Press SARL.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).

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<Previous Article In Issue
Next Article In Issue>
Journal
International Journal of Computational Intelligence Systems
Volume-Issue
12 - 2
Pages
1282 - 1294
Publication Date
2019/11/12
ISSN (Online)
1875-6883
ISSN (Print)
1875-6891
DOI
10.2991/ijcis.d.191101.002How to use a DOI?
Copyright
© 2019 The Authors. Published by Atlantis Press SARL.
Open Access
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

risenwbib
TY  - JOUR
AU  - Hafezali Iqbal Hussain
AU  - Fakarudin Kamarudin
AU  - Hassanudin Mohd Thas Thaker
AU  - Milad Abdelnabi Salem
PY  - 2019
DA  - 2019/11/12
TI  - Artificial Neural Network to Model Managerial Timing Decision: Non-linear Evidence of Deviation from Target Leverage
JO  - International Journal of Computational Intelligence Systems
SP  - 1282
EP  - 1294
VL  - 12
IS  - 2
SN  - 1875-6883
UR  - https://doi.org/10.2991/ijcis.d.191101.002
DO  - 10.2991/ijcis.d.191101.002
ID  - Hussain2019
ER  -