Toward an Empirical Investigation of the Pecking Order Theory: Evidence from Chinese Listed Firms

2019 ◽  
Author(s):  
Xiaochen Jiang ◽  
Jim Huangnan Shen ◽  
Chien-Chiang Lee
Keyword(s):  
Empirical Investigation ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Listed Firms

scholarly journals The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms

2019 ◽  
Vol 10 (2) ◽  
pp. 147
Author(s):  
Mohamad Helmi bin Hidthiir ◽  
Muhammad Farhan Basheer ◽  
Saira Ghulam Hassan
Keyword(s):  
Agency Theory ◽  
Random Effect ◽  
Order Theory ◽  
Managerial Ownership ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financial Decisions ◽  
Listed Firms ◽  
Financing Decisions ◽  
The Impact

Purpose- The prime objective of the current study is to investigate the interdepended of financial decision. In addition to that the impact of different level of managerial ownership on the interdepended of financial decisions is also examined agency theory, pecking order theory and the signaling theory are used as the theoretical lenses to draw the theocratical framework.Design/methodology/approach- The balance panel of 161 nonfinancial firm over the period of five years from 2013 to 2017 is used to achieve the research objectives. Polled OLS, Fixed effect and Random effect estimates are employed to answer the reach questions Findings- The managerial ownership with an average mean ownership of 39 is appeared at the top. Interestingly more than 75 percent firms are being controlled by mangers and in more than 60 percent firms of our sample the controlling managers hold more than 40 percent of shares. The Wu Hausman test is performed to determine the existence of the endogeneity problem.  The results indicates that the financial decisions namely cash holding decisions, financing decisions and investment decisions has significant impact on each other. Where the managerial ownership is in nonlinear relationship with financial decisions. The results of the study are also providing support to agency theory, pecking order theory and the signaling theoryResearch implications- The study will be helpful for policymakers, researchers, corporate personals and financial institutions in understanding the interrelationship between financing decisions and the role of managerial ownership in there interdepended.Originality/value- The study is among the pioneering studies on the issue and will provide policy guideline on the said issues.

scholarly journals Determinants of Capital Structure in Pakistani Listed Firms (The Case of Pakistani Listed Firms)

2021 ◽  
Vol 6 (3) ◽  
Author(s):  
Khan S ◽  
◽  
Ullah S ◽  
ur Rehman I ◽  
Sami I ◽  
...  
Keyword(s):  
Stock Exchange ◽  
Order Theory ◽  
Insurance Companies ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Leverage Ratio ◽  
Listed Firms ◽  
Financial Firms ◽  
Investment Companies ◽  
Size Growth

The sample data was comprised of non-financial firms listed on Karachi Stock Exchange, Pakistan from 1993 to 2002 excluding banks, insurance companies, and investment companies. We were taken the debt to total assets ratio as a proxy for leverage (dependent variable) that was measured following ways mentioned in previous studies (Jensen (1986), Harris and Revive (1990) and Banerjee, et al., 2000). For potential determinants of leverage, we study four independent variables namely tangibility, size, growth and profitability. Variables affecting leverage ratio were calculated by dividing the total debt by total assets and 3-variables were significantly related to leverage ratio whereas the remaining variables were not statistically significant in having relationship with the debt ratio. Our results showed that tangibility variable confirms tradeoff theory, Growth (GT) variable confirms the agency theory hypothesis and Profitability (PF) confirms the predictions of pecking order theory.

scholarly journals Does Capital Structure Drive Profitability in the Energy Sector?

Energies ◽  
2021 ◽  
Vol 14 (16) ◽  
pp. 4803
Author(s):  
Monika Wieczorek-Kosmala ◽  
Joanna Błach ◽  
Iwona Gorzeń-Mitka
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Energy Sector ◽  
Short Term ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
The Czech Republic ◽  
Listed Firms ◽  
Large Panel

This paper investigates the factors that determine the profitability of non-listed energy firms from four central European countries: Hungary, Poland, Slovakia, and the Czech Republic. We apply the regression analysis, on a large panel of firm-year observations for the 2015–2019 timespan, to verify the hypothesis on the inversed relationship between leverage and profitability of the companies performing in the energy sector. Our results support the inversed relationship for debt in total and long-term debt, which are consistent with the assumptions of the pecking order theory. However, for short-term debt, we have found a direct relationship, which confirms the assumptions of the trade-off theory of capital structure. Our work contributes to the existing debate on the interplay between financial leverage and profitability, by providing evidence for a large panel of non-listed firms, from a single sector (energy)-oriented perspective.

Firm Profitability and Adjustment of Capital Structure: Indian Evidence

2019 ◽  
Vol 23 (3) ◽  
pp. 297-308
Author(s):  
Biswajit Ghose ◽  
Kailash Chandra Kabra
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Adjustment Process ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Partial Adjustment ◽  
Listed Firms ◽  
Indian Context ◽  
Adjustment Speed ◽  
Target Leverage

The present study investigates the relevance of capital structure dynamics in Indian context by examining the speed at which firms adjust towards their target capital structure. Apart from symmetric adjustment speed, the study also investigates the asymmetries in adjustment speed based on profitability of firms. Using partial adjustment framework on an unbalanced panel of 28,532 firm-year observations comprising 2,718 listed firms over a period of 2004–2005 to 2015–2016, the study finds that Indian firms maintain target leverage and adjust towards the same with a moderate annual adjustment speed of around 32 per cent. The study further observes that high-profitability firms, in general, adjust significantly faster than low-profitability firms which possibly indicate better accessibility in the financial market, lesser costs of adjustments and ability to adjust payout ratio for the former than the latter. Further investigation reveals that high-profitability firms make more adjustment in case of over-leverage, whereas low-profitability firms make more adjustment in case of under-leverage. These results possibly indicate the implications of availability of internally generated funds. Overall, the study concludes that adverse selection cost plays important role in the target adjustment process and hence, both trade-off theory and pecking order theory have relevance in Indian context.

The Impact of Financial Crisis on the Determinants of Capital Structure of Listed Firms in India

2017 ◽  
Vol 18 (1) ◽  
pp. 101-121
Author(s):  
Naliniprava Tripathy ◽  
Aman Asija
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Stock Exchange ◽  
Explanatory Power ◽  
Random Effect ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Listed Firms ◽  
The Impact

This study investigates the impact of 2007 financial crisis on the performance of capital structure of 88 non-financial companies listed on National Stock Exchange of India during the period between January 2003 to May 2014 by using Fixed Effect (FE) and Random Effect (RE) Models. The study has divided the data period into two distinct time intervals: (2003 -2007) as “pre-crisis” periods and (2008 – 2014) as “post-crisis” periods. The determinants of capital structure such as size, liquidity, profitability, and tangibility are used in the analysis. The findings show that tangibility and size have a greater influence on capital structure decision before crisis period. The findings also show that the coefficient of profitability is negative, displaying an inverse relationship with leverage. The study concludes that pecking order theory has more explanatory power in comparison to other theories in explaining the factors that determine the capital structure decision of listed firms of India.

scholarly journals The Pecking Order Theory: Evidence from Listed Firms in Nigeria

2015 ◽  
Vol 2 (2) ◽  
pp. 72
Author(s):  
Felix Babatunde Dada ◽  
Ben Ukaegbu
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Critical Evaluation ◽  
Fixed Effect Model ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Vector Error Correction ◽  
Listed Firms ◽  
The Capital Structure

Pecking order theory of capital structure demonstrates how managers could reduce inefficiency in the presence of information asymmetry in the source of finance. This study aims at a critical evaluation of the relevance of pecking order theory to firms, using the panel data of the listed firms on the Nigerian Stock Exchange. The study adopt the fixed effect model for the determination of the target capital structure and the decision is based on the result of the Hausman test. The study applies the Vector error correction model to establish causality between the variables. The outcome indicates that the capital structure of Nigerian firms is positively related to asset structure while it is negatively related to profitability and liquidity. The study also shows that there is a causal relationship ranging from profitability and liquidity to the capital structure.

scholarly journals PENGUJIAN TEORI PECKING ORDER ATAS STRUKTUR MODAL (STUDI PADA ENTITAS TERBUKA DI INDONESIA)

2018 ◽  
Vol 13 (01) ◽  
Author(s):  
Winston Pontoh
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Order Theory ◽  
Business Risk ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Public Firms ◽  
Listed Firms ◽  
Fixed Assets

Insufficient working capital for investment activities is a condition which make shareholders and other firm insiders commonly consider to determine additional source of funds. The decision of shareholders and other firm insiders in determining the source of funds for investment activities shall determine the form of firm capital structure. This study uses 236 listed firms in Indonesia Stock Exchange as the sample and take their financial information in period of 2010 to 2015 as data. In term of hypothesis testing, this study conducts path analysis at significance rate of 5%. Result of analysis shows that capital structures for public firms in Indonesia are tend to apply the model of pecking order theory. Empirically, public firms in Indonesia tend to decrease their usage for long term debt in circumstance if they are facing certain business risk. The study also shows that, profitability is not the main factor in determining firm capital structure in Indonesia.Keywords : pecking order, capital structure, business risk, profitability, fixed assets

scholarly journals Studies of Firm Capital Structure Determinants in Poland: An Integrative Review

e-Finanse ◽  
2015 ◽  
Vol 11 (4) ◽  
pp. 1-22 ◽  
Author(s):  
Andrzej Cwynar ◽  
Wiktor Cwynar ◽  
Robert Dankiewicz
Keyword(s):  
Capital Structure ◽  
Dominant Role ◽  
Empirical Studies ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Listed Firms ◽  
Optimal Capital Structure ◽  
Specific Factors

Abstract We investigated 34 empirical studies aimed at examining the capital structure determinants in firms operating in Poland to test to what degree the financing patterns were steady during the observed period (2001-2012). Specifically, in conducting the survey we were motivated by the following research questions which constitute the objectives of the article: (1) which factors - country or firm-specific - are more relevant in explaining leverage in Poland, (2) which theory - trade-off or pecking order - gains greater support in Poland, and (3) what is the significance of the optimal capital structure notion in Poland. Our results show that financing patterns changed importantly during the last 20 years, which manifests itself mainly in gradual increase in debt ratios with a dominant role of short-term debt, along with the decrease in the importance of country-specific factors (especially in large-sized, listed firms). The signs of the associations between leverage and the key firm-specific factors remained relatively stable during the investigated period, with the exception concerning tangibility. These signs provide greater support for pecking order theory, with at most a moderate role of the target capital structure.

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