The Firm’s Trade Credit Policy Effects on Debt and Capital Structure under Trade-Off and Pecking Order Predictions – A Panel Data Static Model Analysis, from European Western Countries

2010 ◽  
Author(s):  
Justino Manuel Oliveira Marques
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Trade Credit ◽  
Model Analysis ◽  
Static Model ◽  
Credit Policy ◽  
Pecking Order ◽  
Trade Off ◽  
Policy Effects ◽  
Western Countries

Panel Data Analysis of Determinants of Leverage in the Automobile Industry in India

GIS Business ◽  
2018 ◽  
Vol 13 (2) ◽  
pp. 29-47
Author(s):  
Vibha Tripathi
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Automobile Industry ◽  
Panel Data Analysis ◽  
Negative Relationship ◽  
Order Theory ◽  
Ordinary Least Squares ◽  
Pecking Order ◽  
Trade Off ◽  
Coverage Ratio

The study tries to investigate the key determinants of capital structure of leading automobile companies and the Automobile Industry in India. The study also tracks the theory implications, i.e. trade off vs. pecking order in these firms and the industry in general. An attempt is to see, if individually each sample company and the whole industry are influenced by the same determinants of capital structure. Pooled ordinary least squares and panel data econometric techniques such as fixed effect models are used to investigate the most significant determinants that affect the capital structure choice of 10 leading companies categorized as BSE Auto Top 100 and the Automobile Industry as a whole for a period of 14 years from 2000–2001 to 2013–2014. The study reveals some interesting facts and results. Multiple regression analysis reveals that while profitability and size are significant determinants in most of the leading companies; NDTS, Growth, and Debt service coverage ratio are not significant for these companies. While the Panel data results of the Automobile Industry as a whole reveals that profitability is the only significant determinant having negative relationship with debt equity ratio; and the other variables are insignificant. Also individual companies coefficient results shows implications of mix of pecking order and trade off theories while the panel data results of the whole Industry strongly supports the Pecking order theory.

scholarly journals Explanatory Factors of the Capital Structure

2020 ◽  
Vol 4 (6) ◽  
pp. 519-529
Author(s):  
Marta Silva ◽  
Luís Pereira Gomes ◽  
Isabel Cristina Lopes
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Statistical Tests ◽  
Negative Relationship ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Explanatory Factors ◽  
The Capital Structure

This paper presents an empirical study of the capital structure of Portuguese companies where the main objective is to find key explanatory factors for indebtedness decisions. The relations between indebtedness and its determinants are tested in the light of the Trade-Off Theory and the Pecking-Order Theory. The motivation of this work was to contribute to the scientific research on the influential determinants of the capital structure and to deepen the knowledge of the Portuguese market. The quantitative methodology is used, through an econometric model for panel data using accounting information of 55 Portuguese companies between 2014 and 2016. Statistical tests such as the F test, the Lagrange Multiplier Breusch-Pagan test and the Hausman test were used to identify the most appropriate method of estimation, which resulted in a panel data model with random effects for individuals. The findings of this study suggest that indebtedness have a positive relation with tangibility and the size of the company, which supports the Trade-Off Theory. However, the positive relationship with the non-debt tax benefits suggests the importance of taxes, contrary to Trade-Off Theory. The negative relationship with cash flows, coupled with the positive relationships between size and growth opportunities, suggest the use of funding only when internal funds become insufficient, supporting the Pecking-Order Theory. The general results support that both theories partially explain the financing decisions of Portuguese companies. Doi: 10.28991/esj-2020-01249 Full Text: PDF

Determinants of Capital Structure with Reference to Select Indian Companies: A Panel Data Regression Analysis

2020 ◽  
Vol 16 (2) ◽  
pp. 79-92
Author(s):  
Rajbinder Kaur ◽  
Arup Kumar Chattopadhyay ◽  
Debdas Rakshit
Keyword(s):  
Regression Analysis ◽  
Panel Data ◽  
Capital Structure ◽  
Order Theory ◽  
Computer Hardware ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Panel Data Regression ◽  
Data Regression

This article mainly focuses on the analysis of determinants of capital structure of 50 Bombay Stock Exchange (BSE)-listed sample companies, choosing 5 sample companies from each of 10 industries, namely cement, computer hardware, large heavy engineering, fertiliser, fast-moving consumer goods (FMCG), large electric equipment, mining/mineral, textile, large tyres and pharmaceutical over 15 years’ time period ranging from 1999–2000 to 2013–2014, applying panel data regression technique. Our study has first made industry-wise empirical analysis of capital structure with respect to eight firm-specific determinants, viz. profitability, size, growth, tangibility, non-debt tax shield, liquidity, uniqueness and income variation. Subsequently, we have made a comparative analysis of selected determinants of capital structure across selected industries to determine their capital structure behaviour in view of three prominent capital structure theories, namely Pecking Order Theory, Trade-Off Theory and Agency Cost Theory. The regression analysis concludes that the Pecking Order Theory and the Trade-Off Theory mostly describe the observed relationship of independent factors with capital structure of the selected Indian industries. Profitability emerges as a significant determinant in devising the capital structure of the selected industries and reveals that greater proportion of profits is likely to raise the internal fund for financing future investment projects and, therefore, less dependent on external borrowings.

scholarly journals Determinants of Debt Structure in Ace Market Busr Malaysia: A Panel Data Analysis

2018 ◽  
pp. 390-395
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Significant Relationship ◽  
Panel Data Analysis ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Tax Shield

This study was conducted with the aim to examine the relevance of different financing theories namely Agency Theory, Trade-Off Theory and Pecking Order Theory to explain capital structure choices among firms in “Access, Certainty, Efficiency” (ACE) Market of Bursa Malaysia. The ACE Market is the financing source for the high-growth and technology requirements of middle-sized firms. The literature on debt policy decision making in the ACE market have been scant, leading the scholars to realize the necessity of performing more studies in this field. To further explain this issue, this study performed a quantitative analysis on a panel data sample of 60 ACE firms from 2005 to 2016. Three proxies for leverage namely total, long-term and short-term debts were examined based on the total assets and equity in six regression models. From seven variables examined in this study, findings indicated a significant relationship between warrant and debt in all models. In addition, liquidity, firm size, profitability and leverage showed significant relationship in all the models except for long-term debt. However, reputation, non-debt tax shield and interest tax shield were seen significant in some models. Trade-off Theory and Pecking Order Theory can jointly clarify determinants of firms’ capital structure in the ACE Market.

scholarly journals Determinants of the Capital Structure of Companies Listed on the Stock Exchanges of Argentina, Brazil and Chile: An Empirical Analysis of the Period from 2007 to 2016

2020 ◽  
Vol 12 (6) ◽  
pp. 18
Author(s):  
Marcelo Rabelo Henrique ◽  
Sandro Braz Silva ◽  
Antônio Saporito ◽  
Sérgio Roberto da Silva
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Order Theory ◽  
Future Research ◽  
Stock Exchanges ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Speed Of Adjustment ◽  
Asset Growth ◽  
The Capital Structure

The present investigation refers to the determinants of the capital structure, using the technique of multiple regression through Panel Data of open capital companies in the stock exchanges of Argentina, Brazil and Chile, in order to know the behavior of determinants of the capital structure in relation to Trade-Off Theory (TOT) and Pecking Order Theory (POT). The POT offers the existence of a hierarchy in the use of sources of resources, while the TOT considers the existence of a target capital structure that would be pursued by the company. Sixteen accounting variables were used, in which five are dependent (related to indebtedness) and eleven are independent variables (explaining the determinants of the capital structure). It is observed that, with the use of the Panel Data, the determinants that seem to influence in a more accentuated way the levels of debt of the companies are: current liquidity, tangibility, return to shareholders, return of assets, sales growth, asset growth, market-to-book and business risk measured by the volatility of benefits. Suggestions for future research include the use of Panel Data to analyze other factors that may influence indebtedness, mainly taxes and dividends, as well as a deeper analysis of factors that may influence the speed of adjustment towards the supposed objective level.

scholarly journals Do DJIA Firms Reflect Stationary Debt Ratios?

Economies ◽  
2020 ◽  
Vol 8 (4) ◽  
pp. 76
Author(s):  
Feng-Li Lin
Keyword(s):  
Capital Structure ◽  
Stationary Processes ◽  
Debt Ratio ◽  
Pecking Order ◽  
Trade Off ◽  
Listed Firms ◽  
Growth Opportunity ◽  
Dow Jones Industrial Average ◽  
The Mean ◽  
The Stability

To form optimum firm capital structure strategies to face unanticipated economic events, firm managers should understand the stability of a firm’s capital structure. The aim of this research was to study whether the debt ratio is stationary in listed firms on the Dow Jones Industrial Average (DJIA). Two vital capital structure concepts regarding pecking order and trade-off theory are fairly contradictory. Using opposing theoretical contexts, the Sequential Panel Selection Method apparently categorizes which and how many series are stationary processes in the panel. This method was used to test the mean reverting properties of the 25 companies listed on Dow Jones Industrial Average between 2001 and 2017 in this study, which is expected to fill the current gap in the literature. The overall results show that stationary debt ratios exist in 10 of the 25 studied firms, supporting the trade-off theory. Moreover, the 10 firms utilizing trade-off theory are affected by firm size, profitability, growth opportunity, and dividend payout ratio. These results provide vital information for firms to certify strategies to optimize capital structure.

scholarly journals DETERMINATIVE FACTORS OF THE CAPITAL STRUCTURE IN THE INTEGRATED COMPANY OF OIL

2013 ◽  
Vol 5 (1) ◽  
Author(s):  
Julio Henrique Machado ◽  
Carlos Roberto de Godoy
Keyword(s):  
New York ◽  
Capital Structure ◽  
Stock Exchange ◽  
New York Stock Exchange ◽  
Pecking Order ◽  
Trade Off ◽  
York Stock Exchange ◽  
The Capital Structure

As decisões de financiamento têm sido amplamente discutidas em debates acadêmicos sobre finanças corporativas. Como o setor petrolífero é crucial ao desenvolvimento econômico mundial, por representar a principal fonte primária de energia, percebe-se a necessidade de pesquisa sobre este grupo de decisões direcionadas ao setor em questão. Neste contexto, o objetivo do trabalho foi estudar os fatores indutores nas decisões de estrutura de capital nas companhias integradas do setor petrolífero mundial. Foram pesquisadas 18 empresas listadas na New York Stock Exchange (NYSE), considerando o período de 2005 a 2010. As variáveis estudadas foram liquidez, rentabilidade, tangibilidade, risco, tamanho, crescimento, exaustão e reposição de reservas (independentes) e dívida de curto prazo, longo prazo e total (dependente). Para a análise do comportamento das variáveis, efetuou-se o teste de regressão. Verificou-se que os principais atributos que influenciaram as decisões de financiamento no setor foram: liquidez, rentabilidade, risco e tamanho. Ademais, observou-se também que as variáveis específicas do setor, exaustão e reposição, apresentaram forte influência na estrutura de capital. Foram demonstradas evidencias de que tanto a teoria pecking-order quanto a trade-off explicam as decisões de financiamento no setor.

scholarly journals Testing capital structure theories for agricultural cooperatives

2019 ◽  
Vol 22 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Yuxi (Lance) Cheng ◽  
Ani L. Katchova
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Simultaneous Equation ◽  
Equation Model ◽  
Agricultural Cooperatives ◽  
Simultaneous Equation Model ◽  
Short Term ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off

This study investigates adjustments in capital structures for agricultural cooperatives and differences before and during the agricultural downturn which started in 2013. We estimate a simultaneous equation model to test for cooperatives’ capital structure strategies based on two main theories from the corporate finance literature: the trade-off theory and the pecking order theory. Estimation results reveal that agricultural cooperatives in the U.S. generally adjust to short-term financial targets for equity and debt, supporting the trade-off theory while there is little support for the pecking order theory within the agricultural cooperatives sector.

scholarly journals Capital structure determinants of hospitality sector SMEs

2016 ◽  
Vol 23 (1) ◽  
pp. 113-132 ◽  
Author(s):  
Luís Pacheco ◽  
Fernando Tavares
Keyword(s):  
Capital Structure ◽  
Small And Medium Enterprises ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Factors Affecting ◽  
Portuguese Economy ◽  
Hospitality Sector ◽  
The Capital Structure

The main objective of this article is to study the capital structure determinants of small and medium enterprises (SMEs) in the hospitality sector and how this can influence their level of indebtedness. Using panel data methodology and considering a sample of 43 Portuguese hotels, the authors study the capital structure determinants between 2004 and 2013. The study examines the indebtedness level in light of the two main theories – the Trade-off theory and the Pecking Order theory. The hospitality sector was chosen because of its importance in the Portuguese economy and because this particular sector has hardly been studied. In addition to total indebtedness, the authors extend the literature by analysing the differences between short-term and long-term indebtedness. The results obtained suggest that profitability, assets tangibility, firm dimension, total liquidity and risk are key factors affecting the capital structure of hospitality sector SMEs, while growth, other tax benefits and age were not deemed relevant. These results allow us to conclude that Trade-off and Pecking Order theories should not be considered in isolation to explain the capital structure of hospitality sector SMEs.

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