scholarly journals Determinants of financing decisions and management implications: evidence from Spanish agricultural cooperatives

2018 ◽  
Vol 21 (6) ◽  
pp. 701-721 ◽  
Author(s):  
Alicia Mateos-Ronco ◽  
Sandra Guzmán-Asunción
Keyword(s):  
Regression Models ◽  
Order Theory ◽  
Equity Capital ◽  
Agricultural Cooperatives ◽  
Pecking Order ◽  
Management Implications ◽  
Pecking Order Theory ◽  
Financing Decisions ◽  
Determining Factors ◽  
Made In

The unique characteristics of agricultural cooperatives are likely to affect the availability of the funding they can access. This paper analyses the determining factors behind the financing decisions made in these cooperatives, and the management and organisational implications these decisions have for these entities. Financial information obtained from a sample of 106 Spanish agricultural cooperatives was used to calculate the variables that modelled the research hypotheses, which were then introduced into regression models to determine which ones had a significant effect on their financing decisions. According to the economic theory of cooperativism, the results show that these entities come closer to the pecking order theory, i.e. policies that maximise the prices received by members to the detriment of the entity’s self-financing abilities, coupled with restrictions on cooperatives’ equity capital that may lead them to use debt to fund growth. The results also show positive relationships between cooperatives’ indebtedness and other factors, such as investments in non-current assets, liquidity and cooperative size in terms of turnover per member.

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 New evidences on determinants of capital structure from the Indian manufacturing industry

2016 ◽  
Vol 13 (3) ◽  
pp. 82-88 ◽  
Author(s):  
Pradeepta Sethi ◽  
Ranjit Tiwari
Keyword(s):  
Capital Structure ◽  
Manufacturing Industry ◽  
Order Theory ◽  
Manufacturing Firms ◽  
Indian Government ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Optimal Capital Structure ◽  
Financing Decisions ◽  
Size Growth

In the backdrop of Make in India push by Indian government the purpose of this study is to examine the determinants of capital structure towards a better understanding of financing decisions to be undertaken by the Indian manufacturing firms. The data for the analysis is drawn from COSPI manufacturing index of Centre for Monitoring Indian Economy (CMIE). Our sample is an unbalanced panel of 1077 firms over the period 2000-01 to 2012-13. We apply system-GMM to study different factors that affect the leverage decision of firms in India. The findings of the study reveals that the choice of optimal capital structure can be influenced by factors such as profitability, size, growth, tangibility, non-debt tax shields, uniqueness and signal. We also find the existence of both pecking order theory and static trade-off theory in the case of Indian manufacturing firms. The results thus obtained are robust across the different proxies of leverage

scholarly journals The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms

2019 ◽  
Vol 10 (2) ◽  
pp. 147
Author(s):  
Mohamad Helmi bin Hidthiir ◽  
Muhammad Farhan Basheer ◽  
Saira Ghulam Hassan
Keyword(s):  
Agency Theory ◽  
Random Effect ◽  
Order Theory ◽  
Managerial Ownership ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financial Decisions ◽  
Listed Firms ◽  
Financing Decisions ◽  
The Impact

Purpose- The prime objective of the current study is to investigate the interdepended of financial decision. In addition to that the impact of different level of managerial ownership on the interdepended of financial decisions is also examined agency theory, pecking order theory and the signaling theory are used as the theoretical lenses to draw the theocratical framework.Design/methodology/approach- The balance panel of 161 nonfinancial firm over the period of five years from 2013 to 2017 is used to achieve the research objectives. Polled OLS, Fixed effect and Random effect estimates are employed to answer the reach questions Findings- The managerial ownership with an average mean ownership of 39 is appeared at the top. Interestingly more than 75 percent firms are being controlled by mangers and in more than 60 percent firms of our sample the controlling managers hold more than 40 percent of shares. The Wu Hausman test is performed to determine the existence of the endogeneity problem.  The results indicates that the financial decisions namely cash holding decisions, financing decisions and investment decisions has significant impact on each other. Where the managerial ownership is in nonlinear relationship with financial decisions. The results of the study are also providing support to agency theory, pecking order theory and the signaling theoryResearch implications- The study will be helpful for policymakers, researchers, corporate personals and financial institutions in understanding the interrelationship between financing decisions and the role of managerial ownership in there interdepended.Originality/value- The study is among the pioneering studies on the issue and will provide policy guideline on the said issues.

scholarly journals Testing capital structure theories for agricultural cooperatives

2019 ◽  
Vol 22 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Yuxi (Lance) Cheng ◽  
Ani L. Katchova
Keyword(s):  
Capital Structure ◽  
Order Theory ◽  
Simultaneous Equation ◽  
Equation Model ◽  
Agricultural Cooperatives ◽  
Simultaneous Equation Model ◽  
Short Term ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Trade Off

This study investigates adjustments in capital structures for agricultural cooperatives and differences before and during the agricultural downturn which started in 2013. We estimate a simultaneous equation model to test for cooperatives’ capital structure strategies based on two main theories from the corporate finance literature: the trade-off theory and the pecking order theory. Estimation results reveal that agricultural cooperatives in the U.S. generally adjust to short-term financial targets for equity and debt, supporting the trade-off theory while there is little support for the pecking order theory within the agricultural cooperatives sector.

scholarly journals Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

2018 ◽  
Vol 10 (5) ◽  
pp. 231 ◽  
Author(s):  
Forbeneh Agha Jude ◽  
Ntieche Adamou
Keyword(s):  
Order Theory ◽  
Study Data ◽  
Bank Loans ◽  
Bank Loan ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financing Decisions ◽  
Loan Financing ◽  
Finance Theory ◽  
External Equity

The objective of this study is to highlight the influence of entrepreneurs’ behaviour on the decisions to apply for bank loans. A mixed research methodology known as triangulation was employed in order to achieve the objective of the study. Data were sourced from a stratified randomly selected sample of 450 Cameroonian SMEs and analysed using logistic regression. The result of the study revealed that both control aversion and overconfidence behaviours of the owner/managers influence significantly the decisions of SMEs to apply for bank loans.  From the result, it is found that behavioural finance theory explains the decisions of SMEs to seek for bank credits. Contrary to the predictions of the pecking order theory, managerial behaviours such as the fear to loss the control of the firm, and overconfidence provide explanations on the decisions of SMEs to seek for bank loans. For instance, the fact that debt does not entail any loss of business control urges SMEs to prefer debt than external equity.

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 Do South African state-owned entities follow the pecking order theory of capital structure?

2021 ◽  
Vol 10 (1) ◽  
pp. 25-33
Author(s):  
Ferina Marimuthu ◽  
Stephanie Caroline Singh
Keyword(s):  
South African ◽  
African State ◽  
Order Theory ◽  
Debt Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Investment Projects ◽  
Financing Decisions ◽  
Internal Funding ◽  
Section Sample

In corporate finance, the pecking-order theory suggests that companies adhere to a particular financing hierarchy, with internal funding taking preference over external funding, and debt financing taking preference over equity. This paper examines whether South African state-owned entities prioritize their financing sources as predicted by the pecking-order theory. A financing deficit variable comprising various cash flow-based components was used to test the theory. A panel regression model was employed using panel data estimators. Using a cross-section sample of 33 state-owned entities from 1995 to 2018, the study finds no evidence that South African state-owned entities follow a pecking order to finance investment projects. The pecking order theory proposition that costs of adverse selection are dominant for lower levels of leverage provides a reason for the financing deficit coefficient not being close to unity and hence an indication that the SOEs in South Africa do not follow the pecking order behavior in their financing decisions, an indication that South African capital market is still developing.

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.

scholarly journals Insiders’ response to market valuation, and the timing of equity-debt dual issues by Japanese firms

2011 ◽  
Vol 8 (4) ◽  
pp. 275-290
Author(s):  
Ammar M. Eltayeb
Keyword(s):  
Market Timing ◽  
Order Theory ◽  
Market Valuation ◽  
Pecking Order ◽  
Stock Valuation ◽  
Pecking Order Theory ◽  
Equity Issues ◽  
Financing Decisions ◽  
Japanese Firms ◽  
Internal Funds

This paper examines the mutual effects of market valuation and firm’s internal performance on insiders’ response to stock valuation, and on their financing decision. Estimates of logit equations explaining the financing decisions of JASDAQ firms 1999-2010 reveal some interesting patterns. Consistent with the pecking-order theory, when insiders perceive the stock is overvalued, they are more likely to issue dual or debt only, after fully utilize internal funds. Further, when insiders think that the stock is correctly valued concomitantly with outstanding internal performance, they are more likely to issue debt or dual rather than equity only. Conversely, consistent with the market-timing theory, insiders focus mainly on equity issues when they believe the stock is correctly valued but firm performance is relatively low. Moreover, firm size and tangibility of assets are decisive characteristics for dual issuers.

scholarly journals The Pecking Order and Financing Decisions: Evidence From Changes to Financial-Reporting Regulation

2020 ◽  
pp. 0148558X2094506
Author(s):  
Patricia Naranjo ◽  
Daniel Saavedra ◽  
Rodrigo S. Verdi
Keyword(s):  
Capital Structure ◽  
Financial Reporting ◽  
Order Theory ◽  
External Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Investment Policies ◽  
Financing Decisions ◽  
Cross Country ◽  
Debt Capacity

We use the staggered introduction of a major financial-reporting regulation worldwide to study whether firms make financing decisions consistent with the pecking order theory. Exploiting cross-country and within country-year variation, we document that treated firms increase their issuance of external financing (and ultimately increase investment) after the new regime. Furthermore, firms make different leverage decisions (debt vs equity) around the new regulation depending on their ex-ante debt capacity, which allows them to adjust their capital structure. Our findings highlight the importance of the pecking order theory in explaining financing as well as investment policies.

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