• Title of article

    Are trade-off and pecking order theories mutually exclusive in explaining capital structure decisions?

  • Author/Authors

    Zelia Serrasqueiro، نويسنده , , Paulo Macas Nunes، نويسنده ,

  • Issue Information
    روزنامه با شماره پیاپی سال 2010
  • Pages
    15
  • From page
    2216
  • To page
    2230
  • Abstract
    In this study, using various panel models and estimators, we find empirically that the trade-off and pecking order theories are not mutually exclusive in explaining quoted Portuguese companies capital structure decisions. However, the finance behaviour of quoted Portuguese companies comes close to that forecast by the pecking order theory: (i) the magnitude of the effects of financial deficit on debt is clearly greater than the magnitude of the adjustment of actual level of debt towards optimal level of debt; and (ii) information asymmetry seems to have special emphasis in companiesʹ capital structure decisions. On the contrary, the attempt for a trade-off between debt tax shields and bankruptcy costs seems to have little relevance in explaining the capital structure of quoted Portuguese companies. The results also suggest that the preference of quoted Portuguese companies is for internal funds rather than debt. However, when internal funds are insufficient, companies use debt to finance high growth opportunities and the need associated with dividends payment.
  • Keywords
    quoted Portuguese companies , Pecking order theory , Capital Structure , trade-off theory
  • Journal title
    African Journal of Business Management
  • Serial Year
    2010
  • Journal title
    African Journal of Business Management
  • Record number

    686104