scholarly journals Leverage and firm performance: new evidence on the role of economic sentiment using accounting information

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Petros Kalantonis ◽  
Christos Kallandranis ◽  
Marios Sotiropoulos
Keyword(s):  
Fixed Effects ◽  
Balance Sheet ◽  
Estimation Procedure ◽  
Time Frame ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
Economic Framework

PurposeThe goal of this paper is twofold. First, to examine the role of expectations in shaping agents' behaviour within an extended time frame which incorporates a prolonged harsh downturn of economic activity. Therefore, the authors allow for an indirect impact of economy-wide expectations operating via their coexistence with firms' balance sheet factors. Second, it is tested whether the behaviour of listed firms as regards to debt follows the pecking order theory.Design/methodology/approachThe authors use the panel data methodology in the estimation of the financial structure models since unobservable heterogeneity is an important determinant towards the target leverage. A fixed effects estimation procedure, with robust intercepts allowed to vary across firms, was employed to examine the relationship between leverage and performance.FindingsThe findings offer evidence of patterns of pecking order behaviour and thus for the necessity of internal financing over external debt. The authors also extended the set of determinants by investigating the effect of macroeconomic conditions on the debt decision of firms. Contrary to the authors’ expectations, short-run beliefs of economic agents appear to play a negative role in leverage.Originality/valueThis paper contributes to the literature in a number of ways. First, following the growing literature of loan dynamics, the findings provide useful insights into corporate capital structure decisions in an economy in which businesses were almost excluded from external financing for over a decade. Second, in order to better understand corporate financing decisions, it is necessary to consider the overall economic framework in which companies and especially the listed ones operate.

Hierarchical financing and reality of the financial structure of Moroccan listed companies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Firano Zakaria ◽  
Doughmi Salawa
Keyword(s):  
Stock Exchange ◽  
Financial Structure ◽  
Order Theory ◽  
Debt Ratio ◽  
Growth Opportunities ◽  
Pecking Order ◽  
Positive Role ◽  
Pecking Order Theory ◽  
Content Type

Purpose There is a wealth of literature on the financing structure of a company. For this reason, the authors considered it useful to present a theoretical and empirical literature review of classical and new theories of the financial structure. The purpose of this study is to realize on a panel of 15 nonfinancial Moroccan companies listed on the Casablanca Stock Exchange, over a period of 11 years. Design/methodology/approach The results obtained indicate that only a few variables from financial theory have an important role in the financing policy of Moroccan companies. The authors have presented the positive role of size and self-financing on the debt ratio. The analysis of the effects of profitability shows in this study that it is negative related on the debt ratio which asserts the predictions of the pecking order theory. Also, the age of the company and the growth opportunities explain the level of indebtedness. Findings Econometric analysis is used to ascertain the nature of the financial structure of listed companies. For this purpose, a large number of companies listed on the Casablanca stock exchange were used. Originality/value The authors have presented the positive role of size and self-financing on the debt ratio. Regarding the influence of profitability, this analysis shows that it is negative related on the debt ratio which asserts the predictions of the pecking order theory. Also, the age of the company and the growth opportunities explain the level of indebtedness.

scholarly journals KINERJA KEUANGAN, KINERJA SAHAM DAN STRUKTUR MODAL DI INDONESIA

2018 ◽  
Vol 18 (2) ◽  
pp. 135
Author(s):  
Nera Marinda Machdar
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Stock Exchange ◽  
Order Theory ◽  
Analysis Method ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Stock Performance ◽  
Observation Period

<p><em>This study addresses the role of the company's financial performance on the company's stock performance, and investigates the role of capital structure as a moderating variable to weaken the effect of the company's financial performance on the company's stock performance. This research uses agency theory and pecking order theory. Panel regression analysis method is used for the data analysis. The data used as the sample of the company is the properti and real estat firms listed in Indonesia Stock Exchange, and the observation period is the year 2011-2016. The number of samples by using purposive samping criteria is available 234 firms-year. The findings of this study is that the company's financial performance has no effect on the company's stock performance, and capital structure can not moderate the effect of the company's financial performance on the company's stock performance.</em></p>

Impact of firm characteristics on capital structure choice of Turkish SMEs

2015 ◽  
Vol 41 (3) ◽  
pp. 286-300 ◽  
Author(s):  
Ali Uyar ◽  
Mustafa Kemal Guzelyurt
Keyword(s):  
Financial Distress ◽  
Survey Methodology ◽  
Order Theory ◽  
Debt Ratio ◽  
Pecking Order ◽  
Financing Policy ◽  
Pecking Order Theory ◽  
Content Type ◽  
Financing Decisions ◽  
Structure Complexity

Purpose – The purpose of this paper is to investigate whether SMEs have a target debt ratio or not; who makes financing decisions for investments; the financing preferences; and which factors play a role in external financing policy of the firms. Design/methodology/approach – The authors adopted questionnaire survey methodology in the study. The questionnaire was administered to SMEs operating in Istanbul through e-mail, telephone, and fax in July 2011. For the analysis, the authors have adopted the non-parametric test of the Kruskal-Wallis. Findings – The study produced several important findings. Most of the surveyed firms do not follow a target debt ratio. Hence, the trade-off theory is not supported. Partners rather than professional managers are more likely to make financing choices in SMEs. The study has provided evidence regarding the implementation of the pecking order principle. Turkish SMEs primarily prefer internal funding sources over external ones and short-term debt over long-term debt. Thus, the pecking order theory is supported. General economic conditions, debt-paying ability of the firm, and financial distress risk play the most important role in outside financing decisions. Research limitations/implications – The study has got some limitations as all such studies have. First, it was conducted only on SMEs in Istanbul; hence it has a geographical limitation. Second, the findings may not be generalizable to large and publicly traded companies as the sample consists of only SMEs. For further study, similar research can be carried out across Turkey on a wider sample. Originality/value – The SMEs are different from large companies in a variety of ways, such as ownership structure, complexity of operations, financing sources, and so on. Hence, there is a need for empirical analysis conducted, particularly, on SMEs. The primary motivation for the study is the scarcity of such empirical works in general. Secondarily, SMEs make up a large proportion of companies in the Turkish economy. Therefore, the subject needs to be studied in Turkey.

scholarly journals The determinants of Sukūk issuance in GCC countries

2020 ◽  
Vol 28 (1) ◽  
pp. 25-45
Author(s):  
Imene Guermazi
Keyword(s):  
Social Responsibility ◽  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
Gcc Countries ◽  
The Social ◽  
Finance Theory ◽  
Corporate Social

PurposeThis paper focuses on Ṣukūk issuance determinants in Gulf Cooperation Council (GCC) countries. Given the dual characteristic of debt and equity of Ṣukūk as well as their unique benefits of social responsibility, the author questions whether the theories of capital structure, the trade-off and the pecking order are able to well explain the Ṣukūk issuance.Design/methodology/approachFirst, the author verifies these theories using capital structure determinants and regresses the Ṣukūk change on these determinants. Second, the author tests the trade-off theory with the target debt model and third, verifies the pecking order theory using the fund flow deficit model.FindingsThe empirical results show that capital structure determinants fail to explain both theories. The author confirms that the Ṣukūk change is significatively linked to the deviation from a Ṣukūk target. So, issuing firms balance the marginal costs of Ṣukūk and their benefits of religiosity and social responsibility toward a target debt. The author finds no evidence of the pecking order theory.Research limitations/implicationsThis study contributes to corporate finance theory and corporate social responsibility. It verifies if capital structure theories proved in conventional financing can well explain Islamic bonds issuance given their social responsibility benefits.Practical implicationsManagers and investors would pay attention to the social factors explaining Ṣukūk issuance in their finance and investment decisions. They would be enhanced to use this financing tool knowing its social unique benefits. This also should encourage governments to enhance this socially responsible financing. Rating agencies would be motivated to evaluate Ṣukūk and firms would improve the quality and relevance of disclosure to get the best rating.Social implicationsThe author highlights the social factors explaining Ṣukūk issuance and enhances corporate social responsibility (CSR).Originality/valueThe author extends the few literature testing capital structure theories for Islamic bonds and highlights the specific social responsible features of Ṣukūk that would bridge their issuance to capital structure theories. So the author enhances the concept of Islamic CSR. Tying capital structure theories to CSR would also help developing Islamic finance theory as a unique social responsible framework.

scholarly journals Capital structure management differences in Latin American and US firms after 2008 crisis

2017 ◽  
Vol 22 (42) ◽  
pp. 51-74 ◽  
Author(s):  
Santiago Valcacer Rodrigues ◽  
Heber José de Moura ◽  
David Ferreira Lopes Santos ◽  
Vinicius Amorim Sobreiro
Keyword(s):  
Latin America ◽  
Capital Structure ◽  
Latin American ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
Determining Factors ◽  
Theoretical Assumptions ◽  
The Usa

Purpose This paper aims to analyse the capital structure determining factors of Latin American and US corporations after the crisis of 2008, as a means of comparing theoretical assumptions and empirical results in markets of different efficiency levels. Design/methodology/approach The study sample comprises 1,091 companies belonging to the six largest economies in Latin America plus the USA, in the years 2009 to 2013. The authors performed a regression with data from a balanced overview, which were obtained by using the criterion of minimum weighted square. Findings The results demonstrated differences in determining factors of capital structure between companies from Latin America and from the USA. The pecking order theory was mostly observed in Latin American companies and the trade-off theory greater was closely aligned with US firms. Originality/value This research brings new contributions to the issue, once the differences and determinative of the debt profile in companies from different economic contexts are compared.

PECKING-ORDER THEORY REVISITED: THE ROLE OF AGENCY COST

2010 ◽  
Vol 78 (5) ◽  
pp. 395-411 ◽  
Author(s):  
KUANG-CHENG A. WANG ◽  
CHUN-HUNG A. LIN
Keyword(s):  
Order Theory ◽  
Agency Cost ◽  
Pecking Order ◽  
Pecking Order Theory

Analysing capital structure of spanish chemical companies using self-organizing maps

Kybernetes ◽  
2017 ◽  
Vol 46 (06) ◽  
pp. 947-965 ◽  
Author(s):  
Xavier Camara-Turull ◽  
María Ángeles Fernández-Izquierdo ◽  
M. Teresa Sorrosal-Forradellas
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Self Organizing Maps ◽  
Pecking Order Theory ◽  
Content Type ◽  
Unsupervised Neural Network ◽  
Chemical Companies ◽  
Self Organizing ◽  
The Capital Structure

Purpose This paper aims to analyses the capital structure of the Spanish chemical industry during the period between 1999 and 2013, with a twofold objective. First, to determine whether the assumptions of pecking order theory are fulfilled throughout the study's timeframe. Second, by using data covering the years before the crisis and the worst years thereof, this study shows how the crisis has affected the capital structure of the companies included in this sample. Design/methodology/approach A particular kind of unsupervised neural network, self-organizing maps, is applied. This methodology allows to cluster firms avoiding the need to establish relationships between the different variables involved in the problem beforehand. Findings Companies are clustered into groups with different degrees of accomplishment of the pecking order theory. The hypothesis about risk is the one that experience a greater variation in the period before and after the crisis. Moreover, companies' capital structure has been lightly disrupted by the crisis. Originality/value The originality of this paper lies in applying an unprecedented methodology to the problem of capital structure. Therefore, the capital structure problem can be approached without setting any function relationship previously.

Testing the pecking order theory of capital structure in an Islamic legal system: the case of Saudi Arabia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Stock Market ◽  
Capital Structure ◽  
Order Theory ◽  
Ordinary Least Squares ◽  
Financial Instruments ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
The Impact ◽  
The Capital Structure

Purpose The purpose of this paper is to examine whether the basic premises according to the pecking order theory (POT) provide an explanation for the capital structure mix of firms operating under Islamic principles. Design/methodology/approach Pooled ordinary least squares, fixed and random effects regressions were performed to test the POT applying data from a sample of 66 Islamic-compliant firms listed on Saudi Stock Market over the period 2006–2016. Findings The results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as a last alternative to finance deficit, Islamic-compliant firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instruments and on Sukuk as last option. The study findings also indicate that the cumulative financing deficit does not wipe out the effects of conventional variables, although it is empirically significant. This provides no support for the POT attempts by Saudi Islamic-compliant firms Research limitations/implications This research contributes to the theory of capital structure in re-validating the findings of a previous theoretical and empirical study. It helps understand the capital structure of Islamic-compliant firms in comparison with conventional firms. It highlights some areas where further research on topics related to capital structure of Islamic-compliant firms is needed. The failure of the POT to explain Saudi firms’ financing choices strongly pushed researchers to test the market timing theory for the Saudi Stock Market. Further research studies could re-examine the trade-off theory in the absence of interest tax shield as in an Islamic economy. Practical implications From a managerial perspective, this research can serve firm executive managers in their financing decisions to add value to the companies. Furthermore, policymakers, bankers and standard-setting organizations should undertake more collective work to simplify the process of issuing Islamic financial instruments including Sukuk. Moreover, the Saudi Government has to encourage the private sector to be more innovative in developing products and services that are in line with Sharia principles. Finally, to attract investors, the Capital Market Authority has to encourage transaction, efficiency and liquidity of Islamic financial instruments. Originality/value The proposed study presents several originalities. First, it explores the implications of relevant Islamic principles on financing preferences of Saudi firms. Second, the present study enables us to investigate what the sudden abundance of liquidity, generated by the record levels of oil prices, implied for the firms’ financing behavior. Finally, it provides further evidence on the impact of financial crisis on the firms’ capital structure choice in a period of considerable slowdown in the world.

Impact of cash surplus on firm’s capital structure: validation of pecking order theory

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Barnali Chaklader ◽  
B. Padmapriya
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Content Type ◽  
Financial Variables ◽  
Factors Influencing ◽  
Short And Long Term ◽  
The Capital Structure

PurposeBuilding on pecking order theory, this study seeks to understand the various financial factors that influence top management's decision regarding the company’s capital structure. The authors attempt to understand and analyse whether the capital structure of mid‐ and small‐cap firms is affected by cash surplus scaled to total assets. Along with other determinants of capital structure such as liquidity, profitability, tangibility, market capitalisation and age, this is considered one of the major factors. Cash surplus is calculated using data from the cash flow statement. It is defined as the difference in cash from operating activities and that from investing activities and is scaled to total assets. To the best of the authors’ knowledge, this is the first study to regress cash surplus scaled to total assets and other determinants over leverage to examine the impact on mid‐ and small‐cap firms. The pecking order theory was found to hold for firms earning cash surplus.Design/methodology/approachData were collected from the CMIE Prowess database of all firms listed on the NIFTY Small cap 250 index and NIFTY Midcap 150 index. The data of non-financial firms belonging to the midcap and small-cap sector, listed on the National Stock Exchange of India from 2012 to 2019 were considered. After cleaning the data, an unbalanced panel of 171 companies totalling 1,362 observations for the NIFTY Small-cap 250 index and another panel of 96 companies with 761 observations for the NIFTY Midcap 150 index was created. Panel data regression analysis was used to determine the effect of cash surplus scaled to total assets on the firms' capital structure.FindingsThis study demonstrates how small- and midcap firms' behave differently in taking capital structure decisions. Pecking order theory was found to hold for firms earning cash surplus as a proportion of total assets (Surplusta).Research limitations/implicationsThe study was conducted through data available on secondary sources and database. The study can be better conducted by conducting a primary survey too. Further study may be conducted with a blend of secondary and questionnaire method. The results can be compared to check the similarity in findings.Practical implicationsManagers can benefit from the findings when making decisions on long- and short-term loans. This study can help managers in terms of the financial variables that have a role to play in the financial leverage of the company. The decision of the managers of midcap or small-cap firms would be different. Factors influencing short- and long-term borrowings are different. Academics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences. Judicious decisions on capital structure will create wealth for the shareholders as the right decision about leverage would result in a proper cost of capital. The findings also add to the existing literature on the Pecking order theory.Social implicationsAcademics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences.Originality/valueThe study extends the existing literature by demonstrating that the capital structure of mid and small-cap firms is affected by cash surplus scaled to total assets. The pecking order theory was found to hold for firms earning cash surplus. This study can inform the practitioners about the financial variables that have a role to play in the company's financial leverage. As the results and significance of the variables of the midcap or small-cap firms are different, the decisions of the managers of these firms would be separate for the capital structure of their firms. The study also infers that the factors influencing short and long-term borrowings are different. The study determines whether managers' decision-making in such companies is different in terms of raising short- and long-term loans. The study attempts to guide managers in considering the different variables that would influence their capital structure decisions, particularly the decision to include debt in the capital. Financial variables need not be of equal importance for managers belonging to small- and midcap companies.

scholarly journals A estrutura de capital de empresas de pequena dimensão em Portugal: uma abordagem segundo as teorias do Trade-off e da Pecking-order

2018 ◽  
Vol 17 (1) ◽  
pp. 365-388
Author(s):  
Claudio Eduardo Ramos Camfield ◽  
Guilhermina Maria da Silva Freitas ◽  
Marco Rafael Fernandes Correia ◽  
Zélia Serrasqueiro
Keyword(s):  
Capital Structure ◽  
Small Firms ◽  
Order Theory ◽  
Small Companies ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Explanatory Factors ◽  
The Capital Structure

Resumo: No corrente estudo analisaram-se os fatores explicativos das decisões de estrutura de capital das Pequenas Empresas (PEs) portuguesas, dado a estrutura de capital destas ter um interesse relevante ao nível econômico-social geral. Neste trabalho centrou-se na teoria Pecking-order (POT) e na teoria do Trade-off, considerando-as mutuamente explicativas e complementares, para avaliar o papel de um conjunto de fatores divididos em três níveis: os internos à empresa, os ligados ao mercado e os ligados ao sistema fiscal. Com base em uma amostra de 2.329 PEs portuguesas, os dados foram sujeitos a uma regressão multivariada. Os resultados obtidos mostram que a rentabilidade, a liquidez e a idade têm um impacto negativo e significativo no endividamento, evidenciando a importância dos princípios da teoria Pecking-order para as decisões de estrutura de capital das empresas portuguesas de menor dimensão. O relacionamento positivo entre a variável dimensão da empresa e o endividamento dá algum suporte à importância da teoria do Trade-off em contexto das decisões de estrutura de capital das pequenas empresas.Palavras-chave: Teoria Pecking-order. Teoria do Trade-off. Endividamento. Portugal. The small firms’ capital structure in Portugal: an approach to the Trade-off and Pecking-order theories Abstract: The present study analyzes the explanatory factors of the capital structure decisions of the Portuguese Small Companies (PEs), given that the capital structure of these companies has a relevant interest in the general economic-social level. This paper focuses on the Pecking-order (POT) theory and the Trade-off theory, considering them mutually explanatory and complementary, to evaluate the role of a set of factors divided into three levels: the internal to the company, market and the tax system. Based on a sample of 2.329 portuguese PEs, data were submitted to a multivariate regression. The results obtained show that profitability, liquidity and age have a significant impact on indebtedness, evidencing the importance of the principles of the pecking-order theory for the capital structure decisions of smaller portuguese firms. The positive relationship between the firm's variable size and indebtedness supports the importance of Trade-off theory in the context of the capital structure decisions of the companies analyzed.Keywords: Pecking-order theory. Trade-off theory. Debt. Portugal.

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