Pecking Order among Select Industries from India and China

Abstract

The present article tests the pecking order of various industries from India and China. Firms in each industry have been segregated into deficit and surplus groups. The empirical findings indicate that a large number of industries from India and China adhere perfectly to the pecking order during deficiency. Borrowings through long-term debt are more among Indian deficit industries, whereas Chinese industries borrow more short-term debt. The debt issues are considerably large among Indian construction, metal and transport industries, and Chinese electrical and metal industries. During deficiency, Indian industries do not redeem debt with significant amount, while most of the Chinese industries utilize a significant portion of new debt issues to retire existing debt due to heavy reliance on short-term debt and therefore, industries perforce are to redeem more debt. In a surplus situation, the pecking order results indicate mixed evidence pertaining to the pecking order behaviour of Indian as well as Chinese industries. The results are robust for Indian chemicals and information and communications technology (ICT) surplus industries and Chinese metal, pharmaceutical and chemicals industries.

Examining the determinants and consequences of financial constraints faced by Micro, Small and Medium Enterprises' owners

“…Further, it has been established by means of data analysis that the more is the severity of financial constraints experienced, the lesser shall be the possibilities for firms to grow. The findings of the present study, hence, line up with work of Donaldson (1961), Jenson and Meckling (1976), Myers (1984), Tucker and Lean (2003), Johnsen and McMahon (2005), Bandari and Bajpai (2005), Bhama et al (2017), and Rajamani and Nirmal Raj (2019), who suggested and predicted slower growth rate for the financially constrained firms.…”

“…Similarly, the discussion on the financial obstacles as the critical determinant of firm growth is polarised by Donaldson (1961), Jenson and Meckling (1976), Myers (1984), Tucker and Lean (2003), Johnsen and McMahon (2005), Gebru ( 2009), Bhama et al (2017). The above discussion therefore enables us to propose the following hypotheses:…”

Impact of Foreign Ownership on Leverage: A Study of Indian Firms

“…Hence, the outcome of our study suggests that a combination of the pecking order theory and the trade-off theory rationalize the capital structure choice in the Indian context. Indian-based studies like Chakraborty (2010) and Chadha and Sharma (2015) ascertained the same, while Bhama et al (2017) backed the pecking order theory and Bajaj et al (2018) supported trade-off theory.…”

apital structure adjustment in Latin American firms: An empirical test based on the Error Correction Model

“…Other recent studies offered more favorable results for this theory. Bhama, Jain, and Yadav (2017) analyzed 405 Indian firms and 312 Chinese firms between 2003 and 2014 and obtained favorable results for the pecking order theory. However, the authors warned that the validity of this approach depends on the size of the deficit (surplus) and the industry.…”