scholarly journals Does Information Asymmetry Affect Dividend Policy? Analysis Using Market Microstructure Variables

2021 ◽  
Vol 13 (7) ◽  
pp. 3627
Author(s):  
Seonhyeon Kim ◽  
Jin-young Jung ◽  
Sung-woo Cho
Keyword(s):  
Information Asymmetry ◽  
Market Microstructure ◽  
Dividend Policy ◽  
Emerging Market ◽  
Negative Relationship ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Stock Liquidity ◽  
The Relationship

This study analyzes the relationship between information asymmetry and dividend policy in an emerging market, Korea. We adopt several proxies for information asymmetry, such as the Glosten–Harris and Hasbrouk–Foster–Viswanathan models, drawn from market microstructure literature. This study finds a negative relationship between information asymmetry and dividend yields, which appears to be particularly strong when firms have difficulty raising external capital because they have high systematic risk, financial constraints, or low stock liquidity. This result, based on an analysis using market microstructure variables that provide direct measures of information asymmetry, suggests that the pecking order theory holds for the Korean stock market and that information asymmetry is a strong determinant of dividend policy decisions in an emerging market.

scholarly journals Financial frictions and substitution between internal and external funds in publicly traded Brazilian companies

2012 ◽  
Vol 23 (58) ◽  
pp. 19-32 ◽  
Author(s):  
Márcio Telles Portal ◽  
João Zani ◽  
Carlos Eduardo Schönerwald da Silva
Keyword(s):  
Cash Flow ◽  
Financial Frictions ◽  
Negative Relationship ◽  
Investment Decisions ◽  
Order Theory ◽  
Publicly Traded ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Internal Funds ◽  
External Funds

The present study aimed to document the effects of financial constraints on the negative relationship between cash flow and external funds, a phenomenon associated with the Pecking Order Theory. This theory suggests that companies subject to more expensive external funds (financially constrained firms) should demonstrate a stronger negative relationship with cash flow than companies subject to minor financial frictions (financially unconstrained firms). The results indicate that the external funds of constrained firms consistently present less negative sensitivity to cash flow compared with those of unconstrained companies. Additionally, the internal funds of constrained companies demonstrate a positive sensitivity to cash flow, whereas those of unconstrained companies do not show any such significant behavior. These results are in accordance with the findings of Almeida and Campello (2010), who suggest the following: first, because of the endogenous nature of investment decisions in constrained companies, the complementary relationship between internal and external funds prevails over the substitutive effects suggested by the Pecking Order Theory; and second, the negative relationship between cash flow and external funds cannot be interpreted as evidence of costly external funds and therefore does not corroborate the Pecking Order Theory.

scholarly journals Evaluation of Monetary Challenges Affecting Operations of Private Tertiary Colleges in Nakuru Town, Kenya

2018 ◽  
Vol 3 (3) ◽  
pp. 67
Author(s):  
A. N. Mugo
Keyword(s):  
Social Sciences ◽  
Research Design ◽  
Target Population ◽  
Order Theory ◽  
Primary Data ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Descriptive Research ◽  
Entry Points ◽  
The Relationship

Tertiary colleges are the institution in between the secondary and the universities. They are set aside for those students who fail to join universities due to failure of meeting entry points or lack of requisite fees. Most of these institutions are run by private sectors while a small percentage is run by public sectors. Due to various challenges here have been instances of monetary constraints in these institutions. This facilitated this study which hunted to evaluate the monetary challenges affecting operations of the private tertiary colleges. The study sought to establish the access of funds and credit facilities on operations of the aforestated private tertiary colleges. The pecking order theory guided the study. The study was conducted amongst private tertiary colleges in Nakuru town, Kenya. The study adopted descriptive research design with target population of 109 employees of these institutions. A census survey was conducted. The study employed a questionnaire to collect primary data. Data was processed and analyzed with the aid of the Statistical Package for Social Sciences software. Descriptive and inferential analyses were duly conducted. The findings indicated that access of funds and credit facilities affect operations of private tertiary colleges positively and that the relationship between the two constructs is statistically significant (r = 0.665; p < 0.01). The study concluded that the role played by funds and credit facilities in the Operations of private tertiary colleges cannot be understated. It is recommended that the management of private tertiary colleges should devise various sources of funding such as initiating income-generating projects and liaise with corporate entities for sponsorship of needy students. 

scholarly journals Impact of foreign ownership on dividend policy in Poland

e-Finanse ◽  
2017 ◽  
Vol 13 (4) ◽  
pp. 76-88 ◽  
Author(s):  
Andrzej Zyguła
Keyword(s):  
Dividend Policy ◽  
Stock Exchange ◽  
Payout Policy ◽  
Order Theory ◽  
Free Cash Flow ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Foreign Investors ◽  
Warsaw Stock Exchange ◽  
The Impact

AbstractThe article analyses the impact of foreign investors, who were the majority shareholders of companies on the Warsaw Stock Exchange, on dividend policy of these companies in the years 2004-2014. An evaluation of the direction and strength of the influence of the analysed group of investors, using 2 models, was conducted applying logistic regression. The first – dividend payout policy based on the binary logit model - showed that along with a growing share of a foreign investor in a given company the probability of dividend payment by the company increased significantly. The second – dividend level change model based on the multinominal logit method - showed, however, that with an increasing share of foreign investors the probability that a given company will reduce the paid dividend level was enhanced significantly. Additionally, it should be stated that these results, irrespective of the model used, were to a very large extent in line with conclusions of the pecking order theory. However, in the case of signaling, free cash flow and maturity theories, these results only to a small extent provided evidence supporting these theories.

Does financing behavior of SME entrepreneurs of Bangladesh follow capital structure theory?-an investigation into Pecking Order Theory

2020 ◽  
pp. 2050037
Author(s):  
Md. Rostam Ali ◽  
Rustom Ali Ahmed ◽  
Rushafa Tasnim Tisha ◽  
Md. Ashikul Islam
Keyword(s):  
Capital Structure ◽  
Information Asymmetry ◽  
Order Theory ◽  
Bank Loan ◽  
Structure Theory ◽  
Primary Data ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Debt Market ◽  
Capital Structure Theory

This study attempts to investigate whether the financing preferences of small and medium enterprises (SMEs)’ entrepreneurs of Bangladesh follow capital structure theory by investigating into Pecking Order Theory (POT). For this study, cross-sectional primary data have been collected through questionnaire. The answers of the questions have been measured through five points Likert Scale. The scores were analyzed using mean score. To analyze the data, some descriptive statistics have been used. Besides, one sample one tail [Formula: see text]-test has been applied to test the hypotheses. The study finds that the entrepreneurs themselves do not believe that there is an information asymmetry in debt market. But their perception regarding debt market ascertained the presence of the information asymmetry between SME sector (entrepreneurs of SME) and the debt market (banks). The answers of respondents are statistically significant that they want to use the retained profits first, bank loan as second and want to issue external equity (taking partner/s) as a third option among these three alternatives of additional financing. This tendency of the respondents towards financing is consistent with POT. Therefore, Government policy for motivating SMEs to keep formal accounting should be introduced to reduce the information asymmetry in debt market along with taking proper initiatives to increase accessibility of SMEs to institutional credit.

scholarly journals Capital structure and the firm’s life stage

2005 ◽  
Vol 36 (4) ◽  
pp. 9-18 ◽  
Author(s):  
A. Frielinghaus ◽  
B. Mostert ◽  
C. Firer
Keyword(s):  
Pilot Study ◽  
Capital Structure ◽  
Life Stage ◽  
Order Theory ◽  
Life Stages ◽  
Stage Model ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
The Relationship ◽  
Over Time

In this paper we argue the case for a relationship between capital structure and a firm’s life stage. We provide an overview of the two sets of theories and follow this with a proposed linkage between the life stage and capital structure. We use the Adizes life stage model to assess the life stage of the firms in our sample. Our pilot study found a statistically significant relationship between life stage and the capital structure of respondents. The nature of the relationship (more debt in the early and late life stages than in prime) supports the pecking order theory of capital structure and suggests a practical use of the life stage model in helping firms to understand how their financing is likely to change over time.

scholarly journals Determinants of Capital Structure: Empirical Evidence from Turkey

2018 ◽  
Vol 8 (1) ◽  
pp. 31 ◽  
Author(s):  
Merve Gizem Cevheroglu-Acar
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Tax Shield ◽  
Financial Firms ◽  
Independent Variable ◽  
Debt Tax Shield ◽  
The Relationship ◽  
The Capital Structure

The primary aim of this study is to identify the firm-specific determinants of the capital structure of non-financial firms in Turkey and to test whether the determinants offered by financial theory are able to provide convincing explanations for non-financial firms in Turkey. Because the relationship between liquidity and capital structure is not well examined for Turkish market in the context of capital structure theories, we include liquidity as independent variable in our models in addition to profitability, growth, non-debt tax shields, size, tangibility, and risk. We use panel regression as econometric model and cover the period from 2009 to 2016. Our results show that profitability, non-debt tax shield, size, tangibility, and liquidity are significant determinants of the capital structure, size being the most robust one. On the other hand, growth and volatility are not significantly related with the leverage. Moreover, we conclude that capital structure decisions of non-financial firms in Turkey are mostly consistent with the hypothesis of pecking order theory rather than trade-off theory.

scholarly journals Descendants of Financing Decision with Reference to Capital Structure: An Empirical Analysis of Indian SMEs

2020 ◽  
Vol 47 (1) ◽  
pp. 33-42
Author(s):  
Sunaina Kanojia ◽  
Vipin Aggarwal ◽  
Ankush Bhargava
Keyword(s):  
Capital Structure ◽  
Small And Medium Enterprises ◽  
Negative Relationship ◽  
Order Theory ◽  
External Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Developed Economies ◽  
Business Operations ◽  
Medium Enterprises

The article attempts to address the descendants especially in case of small and medium enterprises (SMEs) who do business with humongous constraints and largely manage the functions with own skills rather than relying on theories of finance. The study gives a deep insight on the pattern of financing of listed SMEs in India based on the financial information of 428 SMEs and further analysis of financial statements being conducted by generating financial ratios and debt components during the year 2014–2018. The study has been conducted under the reference of different capital structure theories and results have found to be significant in line with the pecking order theory, that is, SMEs utilise profit to ease their debt level and emerging organisations deploy more debt since they require more funds. The startling observation comes in terms of size where SMEs are found to be relatively small and less dependent on external financing to increase the size of the company due to the negative relationship resulting from the analysis of all forms of debt, this result is in nonconformity with the other studies done on the SMEs of developed economies. Informational asymmetry prevails in the Indian SMEs due to smaller size and more control in the hands of few managers. Growth as a parameter has shown reliance on short-term debt for overall financing of the business operations. Overall, study concludes that financing condition of the SMEs in India is still in nascent stages and new avenues of financing must be explored to solve the problems of financing in India.

scholarly journals Same same, but different: capital structures in single family offices compared with private equity firms

2021 ◽  
Author(s):  
Antonia Schickinger ◽  
Alexandra Bertschi-Michel ◽  
Max P. Leitterstorf ◽  
Nadine Kammerlander
Keyword(s):  
Private Equity ◽  
Order Theory ◽  
Debt Financing ◽  
Single Family ◽  
Firm Age ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financial Decisions ◽  
Financing Choices ◽  
The Relationship

AbstractDespite the increasing interest in single family offices (SFOs) as an investment owned by an entrepreneurial family, research on SFOs is still in its infancy. In particular, little is known about the capital structures of SFOs or the roots of SFO heterogeneity regarding financial decisions. By drawing on a hand-collected sample of 104 SFOs and private equity (PE) firms, we compare the financing choices of these two investor types in the context of direct entrepreneurial investments (DEIs). Our data thereby provide empirical evidence that SFOs are less likely to raise debt than PE firms, suggesting that SFOs follow pecking-order theory. Regarding the heterogeneity of the financial decisions of SFOs, our data indicate that the relationship between SFOs and debt financing is reinforced by the idiosyncrasies of entrepreneurial families, such as higher levels of owner management and a higher firm age. Surprisingly, our data do not support a moderating effect for the emphasis placed on socioemotional wealth (SEW).

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

scholarly journals Determinants of Debt-Equity Choice – Evidence from Poland

2015 ◽  
Vol 5 (2) ◽  
pp. 1-8 ◽  
Author(s):  
Bogna Kazmierska-Jozwiak ◽  
Jakub Marszałek ◽  
Paweł Sekuła
Keyword(s):  
Capital Structure ◽  
Stock Exchange ◽  
Negative Relationship ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Significant Negative Relationship ◽  
Warsaw Stock Exchange ◽  
Growth Prospects ◽  
A Company

The question of debt-equity choice has so far been widely discussed in literature. The aim of the paper is to analyse the determinants of capital structure of Polish enterprises. We analysed factors that may impact the indebtedness. This analysis fills in the gap in worldwide studies with the case of a country representing the group of „emerging markets”. The paper examines capital structure determinants of non-financial companies listed on the Warsaw Stock Exchange. We used five independent variables compatible with the up-to-date achievements in the field. The results indicate that there is an evidence of a significant negative relationship between the size of a company, its growth rate, profitability, tangibility and the level of total debt. The study shows positive relationship between growth prospects of the company and the debt level. The results of the study indicate that the pecking order theory better explains the changes in indebtedness of analysed companies than other capital structure theories. Obtained results are mostly consistent with earlier studies conducted in the Poland and with studies in Western economies.

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