scholarly journals Market Timing and Pecking Order Theory in Latin America

2021 ◽  
Vol 13 (2) ◽  
pp. 345-370
Author(s):  
Francisco Javier Vásquez Tejos ◽  
Hernan Pape Larre
Keyword(s):  
Capital Structure ◽  
Latin American ◽  
Market Timing ◽  
Order Theory ◽  
Annual Data ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Share Prices ◽  
Definitive Evidence ◽  
The Capital Structure

This article aims to determine if the capital structure of Latin American companies in the emerging markets of Brazil, Chile, Mexico, and Peru, are managed according to the market timing theory or the pecking order theory. The analysis was based on a non-probabilistic sample of 170 companies, with annual data, from an unbalanced panel, in the period 2010-2018. Regressions were applied with the fixed and random effects method. The results do not show significant evidence indicating that Latin American companies comply with the pecking order theory. Furthermore, there is also no definitive evidence that companies benefit from low share prices to issue capital or from debt issuance in the face of high stock market prices. There are signs that they follow a blend of several theories, which would indicate their characteristics in the capital structure of Latin American companies.

scholarly journals Market Timing and Pecking Order Theory in Latin America

2021 ◽  
Vol 13 (2) ◽  
pp. 79-104
Author(s):  
Francisco Javier Vásquez Tejos ◽  
Hernan Pape Larre
Keyword(s):  
Capital Structure ◽  
Latin American ◽  
Market Timing ◽  
Order Theory ◽  
Annual Data ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Share Prices ◽  
Definitive Evidence ◽  
The Capital Structure

This article aims to determine if the capital structure of Latin American companies in the emerging markets of Brazil, Chile, Mexico, and Peru, are managed according to the market timing theory or the pecking order theory. The analysis was based on a non-probabilistic sample of 170 companies, with annual data, from an unbalanced panel, in the period 2010-2018. Regressions were applied with the fixed and random effects method. The results do not show significant evidence indicating that Latin American companies comply with the pecking order theory. Furthermore, there is also no definitive evidence that companies benefit from low share prices to issue capital or from debt issuance in the face of high stock market prices. There are signs that they follow a blend of several theories, which would indicate their characteristics in the capital structure of Latin American companies.

scholarly journals Testing the pecking order theory of capital structure: the case of Islamic financing modes

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Moncef Guizani
Keyword(s):  
Capital Structure ◽  
Random Effect ◽  
Order Theory ◽  
Equity Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Executive Managers ◽  
The Capital Structure

AbstractThe purpose of this paper is to examine whether or not the basic premises according to the pecking order theory provide an explanation for the capital structure mix of firms operating under Islamic principles. Pooled OLS and random effect regressions were performed to test the pecking order theory applying data from a sample of 66 Islamic firms listed on Kingdom of Saudi Arabia stock market over the period 2006–2016. The results show that sale-based instruments (Murabahah, Ijara) track the financial deficit quite closely followed by equity financing and as the last alternative to finance deficit, Islamic firms issue Sukuk. In the crisis period, these firms seem more reliant on equity, then on sale-based instrument 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 pecking order theory attempted by Saudi Islamic firms. This research highlights the capital structure choice of firms operating under Islamic principles. It explores the implication of the relevant Islamic principles on corporate financing preferences. It can serve firm executive managers in their financing decisions to add value to the companies.

scholarly journals Determinants of the Capital Structure of Companies Listed on the Stock Exchanges of Argentina, Brazil and Chile: An Empirical Analysis of the Period from 2007 to 2016

2020 ◽  
Vol 12 (6) ◽  
pp. 18
Author(s):  
Marcelo Rabelo Henrique ◽  
Sandro Braz Silva ◽  
Antônio Saporito ◽  
Sérgio Roberto da Silva
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Order Theory ◽  
Future Research ◽  
Stock Exchanges ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Speed Of Adjustment ◽  
Asset Growth ◽  
The Capital Structure

The present investigation refers to the determinants of the capital structure, using the technique of multiple regression through Panel Data of open capital companies in the stock exchanges of Argentina, Brazil and Chile, in order to know the behavior of determinants of the capital structure in relation to Trade-Off Theory (TOT) and Pecking Order Theory (POT). The POT offers the existence of a hierarchy in the use of sources of resources, while the TOT considers the existence of a target capital structure that would be pursued by the company. Sixteen accounting variables were used, in which five are dependent (related to indebtedness) and eleven are independent variables (explaining the determinants of the capital structure). It is observed that, with the use of the Panel Data, the determinants that seem to influence in a more accentuated way the levels of debt of the companies are: current liquidity, tangibility, return to shareholders, return of assets, sales growth, asset growth, market-to-book and business risk measured by the volatility of benefits. Suggestions for future research include the use of Panel Data to analyze other factors that may influence indebtedness, mainly taxes and dividends, as well as a deeper analysis of factors that may influence the speed of adjustment towards the supposed objective level.

scholarly journals Capital structure determinants of hospitality sector SMEs

2016 ◽  
Vol 23 (1) ◽  
pp. 113-132 ◽  
Author(s):  
Luís Pacheco ◽  
Fernando Tavares
Keyword(s):  
Capital Structure ◽  
Small And Medium Enterprises ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Factors Affecting ◽  
Portuguese Economy ◽  
Hospitality Sector ◽  
The Capital Structure

The main objective of this article is to study the capital structure determinants of small and medium enterprises (SMEs) in the hospitality sector and how this can influence their level of indebtedness. Using panel data methodology and considering a sample of 43 Portuguese hotels, the authors study the capital structure determinants between 2004 and 2013. The study examines the indebtedness level in light of the two main theories – the Trade-off theory and the Pecking Order theory. The hospitality sector was chosen because of its importance in the Portuguese economy and because this particular sector has hardly been studied. In addition to total indebtedness, the authors extend the literature by analysing the differences between short-term and long-term indebtedness. The results obtained suggest that profitability, assets tangibility, firm dimension, total liquidity and risk are key factors affecting the capital structure of hospitality sector SMEs, while growth, other tax benefits and age were not deemed relevant. These results allow us to conclude that Trade-off and Pecking Order theories should not be considered in isolation to explain the capital structure of hospitality sector SMEs.

scholarly journals A Critical Review of Capital Structure Theories

2012 ◽  
Vol 4 (11) ◽  
pp. 553-557 ◽  
Author(s):  
Syed Muhammad Javed ◽  
Agha Jahanzeb . ◽  
Saif-ur-Rehman .
Keyword(s):  
Capital Structure ◽  
Critical Review ◽  
Market Timing ◽  
Order Theory ◽  
Agency Cost ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off

The purpose of this paper is to scrutinize and appreciate the theories of capital structure starting from theory of Miller and Modigliani (1958) of capital structure, which is also known as irrelevance theory of capital structure and also including theory like pecking order theory, trade off theory, market timing theory and agency cost theory. In addition, authors have tried to explain the theories and their contradiction with each other in detail. This paper will be an addition to understand the theories of capital structure.

scholarly journals Firm characteristics and capital structure adjustment

2018 ◽  
Vol 15 (2) ◽  
pp. 129-144 ◽  
Author(s):  
Winston Pontoh ◽  
Novi Swandari Budiarso
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Market Timing ◽  
Order Theory ◽  
Free Cash Flow ◽  
Internal Conflict ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Public Firms

The adjustment for the firm capital structure is unclear from perspectives of trade-off theory, pecking order theory, life cycle theory, market timing theory, and free cash flow theory, since many research findings contradict each other. Adjustments for the capital structure are complex, since the conditions for each firm are different. The objective of this study is to provide empirical evidence of how firms adjust capital structure in relationship with maturity in context of trade-off, pecking order, free cash flow, and market timing theory. In terms of hypotheses testing, this study conducts logistic regression analysis with 138 Indonesian public firms as the sample in the observed period from 2010 to 2015. To distinguish the results, this study controls the sample by size and age based on the median. The study reports that preferences for the source of funds based on the cost of capital, internal conflict, and firm maturity indicate adjustments for the firm capital structure. Based on Indonesian firms, the form of capital structure in developing countries can refer to a single model or a combination of the trade-off model and pecking order model, as well as market timing.

scholarly journals Determinants of Capital Structure and Testing of Applicable Theories: Evidence from Pharmaceutical Firms of Bangladesh

2016 ◽  
Vol 8 (3) ◽  
pp. 23 ◽  
Author(s):  
Md. Farhan Imtiaz ◽  
Khaled Mahmud ◽  
Avijit Mallik
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Pharmaceutical Firms ◽  
Time Period ◽  
Operating Leverage ◽  
The Empirical Analysis ◽  
Significant Factors ◽  
The Capital Structure

<p>The objectives of this paper are to determine the significant factors that affect the capital structure of listed pharmaceutical firms in Bangladesh and to test the capital structure theories. To achieve the intended objectives a panel dataset including 8 major pharmaceutical firms were taken over the time period from 2009 to 2013. The collected data were analyzed by employing correlated panels corrected standard error model using six variables i.e. profitability, tangibility, growth, size, liquidity and operating leverage. Among the 6 variables tangibility, profitability and operating leverage were found to be statistically significant determinants of capital structure. Profitability, tangibility, growth and operating leverage are negatively related to the capital structure while size and liquidity are positively related to the capital structure of the pharmaceutical firms of Bangladesh. The empirical analysis finds that the static trade-off theory and the pecking order theory are the most dominant capital structure theories for the pharmaceutical firms of Bangladesh. These factors must be considered by the financial manager to determine the appropriate capital structure for the company to maximize value of the firm.</p>

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 Trade-Off Theory and Pecking Order Theory: Evidence from Real Estate Companies in Vietnam

2021 ◽  
Author(s):  
Hoang Duc Le ◽  
Nguyen Quang Viet ◽  
Nguyen Huaong Anh
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Relevant Theory ◽  
The Capital Structure

This study was implemented with the goal of testing the validity of trade-off theory and pecking order theory in determining the capital structure in 50 listed real estate companies in Vietnam. The result of this study shows that the pecking order theory is the more approriate and should be applied for the listed real estate companies in Vietnam, and be the informative document for those firms to take into account the relevant theory to adjust their own capital structure, so that they can raise their own competitiveness and continue the development of the business

scholarly journals DETERMINANTS OF CAPITAL STRUCTURE: AN EMPIRICAL EVALUATION OF OMAN’S TOURISM COMPANIES

2020 ◽  
Vol 7 (1) ◽  
pp. 01-10
Author(s):  
Syeeda Shafiya Mohammadi ◽  
Tamanna Dalwai ◽  
Dure Najaf ◽  
Ashwaq Saif Al-Yaarubi
Keyword(s):  
Capital Structure ◽  
Empirical Evaluation ◽  
Order Theory ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off ◽  
Corporate Managers ◽  
Prior Literature ◽  
Using Data ◽  
The Capital Structure

Purpose: The purpose of this research is to investigate the determinants of the capital structure of tourism companies in Oman. This study uses the trade-off theory and pecking order theory to postulate hypotheses related to determinants of capital structure. Methodology: In line with extant literature, size, liquidity, tangibility, growth opportunities, and risk are used as the determinants of the capital structure. The sample in this study includes nine listed tourism companies for the period 2007 to 2016, which aggregates to 90 firm-year observations. Main findings: The results show that the capital structure of tourism companies is influenced by size, growth, and risk. The trade-off theory and pecking order theory are useful for partially explaining the leverage decisions of Oman's tourism companies. Implications: The empirical findings of this research imply that tourism companies' corporate managers can make optimal capital structure decisions based on determinants. Novelty: To the best of the author's knowledge, this study is a first for examining the determinants of capital structure for Oman's tourism companies using data over ten years. It lends support to the determinants identified in prior literature for developed and developing countries.

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