Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector
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...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Tomas Bata University in Zlín
2012-12-01
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| Series: | Journal of Competitiveness |
| Subjects: | |
| Online Access: | http://www.cjournal.cz/files/118.pdf |
| _version_ | 1818328225811529728 |
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| author | Sheikh Jibran Shakeel Ahmed Wajid Iqbal Waheed Tahir Masood Muhammad |
| author_facet | Sheikh Jibran Shakeel Ahmed Wajid Iqbal Waheed Tahir Masood Muhammad |
| author_sort | Sheikh Jibran |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-13T12:28:47Z |
| format | Article |
| id | doaj.art-3fbfc11ba3704972b2ca628bc3e43bbb |
| institution | Directory Open Access Journal |
| issn | 1804-171X 1804-1728 |
| language | English |
| last_indexed | 2024-12-13T12:28:47Z |
| publishDate | 2012-12-01 |
| publisher | Tomas Bata University in Zlín |
| record_format | Article |
| series | Journal of Competitiveness |
| spelling | doaj.art-3fbfc11ba3704972b2ca628bc3e43bbb2022-12-21T23:46:06ZengTomas Bata University in ZlínJournal of Competitiveness1804-171X1804-17282012-12-01448695Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial SectorSheikh JibranShakeel Ahmed WajidIqbal WaheedTahir Masood MuhammadThis 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.http://www.cjournal.cz/files/118.pdfpecking order theorycapital structuredebt issuanceequitynon-financial firmsbankruptcytrade-off |
| spellingShingle | Sheikh Jibran Shakeel Ahmed Wajid Iqbal Waheed Tahir Masood Muhammad Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector Journal of Competitiveness pecking order theory capital structure debt issuance equity non-financial firms bankruptcy trade-off |
| title | Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector |
| title_full | Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector |
| title_fullStr | Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector |
| title_full_unstemmed | Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector |
| title_short | Pecking at Pecking Order Theory: Evidence from Pakistan’s Non-financial Sector |
| title_sort | pecking at pecking order theory evidence from pakistan s non financial sector |
| topic | pecking order theory capital structure debt issuance equity non-financial firms bankruptcy trade-off |
| url | http://www.cjournal.cz/files/118.pdf |
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