Work

Are Trade-off and Pecking Order Theories of Capital Structure Mutually Exclusive?

Year: 2012

Type: article

Abstract: The objective of the paper is to find out whether the trade-off and pecking order theories are mutually exclusive or complimentary to each other in determining the optimal capital structure of the Indian manufacturing companies during the period 1993-94 to 2007-08. We find that the trade-off and pecking order theories are complimentary to each other to determine the capital structure and therefore, companies' financing behavior is best explained by the modified pecking order theory. We also find that Indian manufacturing companies do have target leverage ratios and the adjustment speed towards the target has been around 40 percent.

Source: Journal of Management and Research

Authors: Sulagna Mukherjee, Jitendra Mahakud

Institutions: T A Pai Management Institute, Indian Institute of Technology Kharagpur

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: diamond

OpenAlex ID: W2260859101

FWCI: 9.574

Cites:

Cited by: 30

Related to: 10