Testing Static Tradeoff Against Pecking Order Models of Capital Structure in Brazilian Firms

Medeiros, Otávio Ribeiro de; Daher, Cecílio Elias

doi:10.2139/ssrn.631563

Cited by 9 publications

(5 citation statements)

References 22 publications

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“…Result show that weak form of pecking order theory is supported by Pakistani firms. These results are in line with Medeiros and Daher (2004) who conducted similar research on Brazilian firms. They also concluded that weak form of Pecking Order existed in Brazil.…”

Section: Resultssupporting

confidence: 92%

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

Sheikh¹,

Ahmed²,

Iqbal³

et al. 2012

JOC

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This study tests the Pecking Order Theory for the capital structure of listed firms in Pakistan. As per Pecking Order Theory in capital structure formulation, internally generated resources would have first priority, followed by debt issuance where equity is used as a last resort. In its strong form, the Pecking Order Theory sustains that equity issues would never occur, whereas in its weak form, limited amounts of issues are acceptable. The methodology adopted in this empirical study involves cross-section regressions and the testing of hypotheses stemming from the underlying theory in its strong and weak forms. A sample of capital structure of non-financial firms listed at KSE is considered from 2001 to 2008. A statistical tool of panel data regression analysis is used to test different firms' data. The value of R2, t-test and F-Stat indicate firms in KSE supporting the weak form of pecking order theory, i.e., the option of using internal equity and debt is more preferred and a limited amount of external equity is used for reinvestment and fund raising purposes.

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Section: Resultssupporting

confidence: 92%

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

Sheikh¹,

Ahmed²,

Iqbal³

et al. 2012

JOC

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“…The authors argued that this was due to the role of information asymmetries in the analyzed market. Similar results were found in Brazilian firms (De Medeiros & Daher, 2004;Correa, Basso & Nakamura, 2013). Other studies present mixed results that depend directly on the productive sector of the analyzed companies (Virgen & Rivera, 2012;Medina, Salinas, Ochoa & Molina, 2014;Cabanilla & Sánchez, 2021).…”

Section: Which Theory Best Predicts the Capital Structure Decision?supporting

confidence: 78%

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

et al. 2023

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The objective of this article is to analyze the capital structure adjustment of Latin American firms through the pecking order and trade-off theories using a sample of 975 non-financial firms for the period 2000-2017. The results support the existence of a target capital structure. Adjustment speeds ranged between 48.9% and 74.3% and generate a rapid convergence of leverage towards its target level. Financial deficits explained less than half of the changes in debt, which contradicts the pecking order theory. The results of the error correction model indicated that companies dynamically deviate from their long-term capital structure. The convergence speeds in the partial adjustment model increased up to 69.5% and 91.7% with the error correction method. These results are relevant for firms and investors.

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“…De Medeiros and Daher (2004) test the static trade‐off model vs. the pecking order hypothesis in Brazil and conclude that the pecking order theory holds best. Chen (2004) studies Chinese firms and concludes that neither the pecking order hypothesis nor the trade‐off model seems to be applicable.…”

Section: Prior Studiesmentioning

confidence: 99%

Pecking Order Behavior in Emerging Markets^*

Seifert¹,

Gönenç²

2009

Financ Manag Account

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This paper examines the validity of the pecking order hypothesis in 23 emerging market countries. Emerging market countries would appear to be an ideal setting for the pecking order hypothesis to hold because of the presence of strong asymmetric information issues and agency costs. We observe, however, little support for the pecking order hypothesis as the primary financing theory for all emerging market firms. Firms in these countries finance their deficit mainly with equity, the opposite of what would be expected under this hypothesis. However, we do find support for the pecking order for firms in emerging market countries that suffer the most from either asymmetric information issues and/or agency costs. Our findings are consistent with the idea that the environment the firm operates in influences the financial decisions the firm makes. n We thank an anonymous referee and participants in the 2007 European Financial Management (EFMA) annual meeting for valuable comments and suggestions.

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Testing Static Tradeoff Against Pecking Order Models of Capital Structure in Brazilian Firms

Cited by 9 publications

References 22 publications

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

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

Pecking Order Behavior in Emerging Markets^*

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Testing Static Tradeoff Against Pecking Order Models of Capital Structure in Brazilian Firms

Cited by 9 publications

References 22 publications

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector

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

Pecking Order Behavior in Emerging Markets*

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Pecking Order Behavior in Emerging Markets^*