Work

A Test of the Pecking Order Theory of Capital Structure in Corporate Finance

Year: 2015

Type: article

Abstract: This paper utilises a cross section of 12, 244 publicly traded corporations in the U.S. from the time period 1999 to 2009 to test the pecking order theory of capital structure. Applying the methodology of Frank and Goyal (2003), limited evidence to support pecking order theory is found. Consistent with Frank and Goyal (2003), a much stronger relationship between net equity issued and financing deficit is observed than net debt issuance and financing deficit. Whereas, the pecking order theory suggests that firms should exhaust all debt issuing capacity before they issue any equity and equity should only be used as a last resort.

Source: RePEc: Research Papers in Economics

Authors: Ali Shakil Khan, Awang Yusop Adom

Institutions: Swinburne University of Technology, Swinburne University of Technology Sarawak Campus

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2218243541

FWCI: 3.816

Cites: 1

Cited by: 9

Related to: 10