Study of The pecking order theory in financing behavior's firms in Iran under financing deficit and surplus situations

Subject Areas : Journal of Investment Knowledge

hojjat-allah ansari ¹ (Associate Professor, management department school of social sciences and economics. .alzahra university. Tehran. Iran)
ronak ghanbarpour ² (Management department, school of social sciences and economics, Alzahra University, Tehran city, Iran.)
zeinab aidi ³ (Management department, school of social sciences and economics, Alzahra University, Tehran city, Iran)

Received: 2021-04-13 Accepted : 2021-04-18 Published : 2021-09-23

Keywords: Financing deficit and surplus, The pecking order theory, financing decision, The pecking order puzzle, Capital Structure,

Abstract :

Capital structure is a combination of debt and equity that companies use to finance their long-term assets. Each of the theories proposed in the field of capital structure is influenced by a specific factor or factors, but so far no single theory has been developed that can comprehensively explain the structure of capital. This study tries to examine the ability of the theory of preferential behavior to explain the financing decisions of 119 companies listed on the Tehran Stock Exchange, in the period of 1388 to 1398. Therefore, by examining the financing behavior of companies under financing deficit and surplus situations, the correctness of the theory of preferential behavior has been examined. Data analysis was performed using the generalized least squares method. The results show that the financing hierarchy of companies in a deficit situation does not follow the theory of preferential behavior, and in this case, companies finance first through the issuance of shares and then through debt. The results also show that the theory of preferential behavior is valid for companies in a surplus situation.

References:

• اسعدی، عبدالرضا. عباس زاده، محمدرضا. 1393. «بررسی عوامل مؤثر بر ساختار سرمایه شرکت‌های وابسته و مستقل از دولت در بورس اوراق بهادار تهران». دو فصلنامه اقتصاد پولی و مالی، شماره 7، 233-210.


• اسلامی بیدگلی، غلامرضا. و طهماسب مظاهری. (1388 .(بررسی نظریه‌های توازی ایستا و سلسله مراتبی در تبیین ساختار سرمایه شرکتها در بورس اوراق بهادار تهران. فصلنامه تحقیقات حسابداری، ش 3 ،ص21-


• افلاطونی، عباس. 1399. «نقش انضباطی بدهی ها، عدم تقارن اطلاعاتی و ارزش شرکت :رویکرد گشتاورهای تعمیم یافتۀ دومرحله ای». فصلنامه علمی مدیریت دارایی و تامین مالی، شماره28، 122-105.


• مـدرس، احمـد و فـرهاد عبداله‌زاده 1378،(مدیریت مالی، جلد دوم، چاپ اول، تهران: شرکت چاپ و نشر بازرگانی.


• نبیئی بروجنی، حسین. نوروزی، محمد. 1394. «بررسی عوامل تعیین کننده ساختار سرمایه شرکتهای پذیرفته شده در بورس اوراق بهادار تهران با تأکید بر نظریه سلسله مراتبی». مجله پژوهش حسابداری، شماره 16، 84-65.


• Allini, A., Rakha, S., McMillan, D., G., Caldarelli, A., 2018."Pecking Order and Market Timing Theory in Emerging markets: The case of Egyptian firms". Research in International Business and Finance. 44, 297-308.


• Baker, M., Wurgler, J., 2002. "Market timing and capital structure." Journal of Finance 57, 1-32.


• Bhama, V., Jain, P.K., Yadav, S.S., 2018. "Relationship between the pecking order theory and firm’s age: Empirical evidences from India". IIMB Management Review. 30, 104–114.


• Chen, D. H., Chen, Ch.D, Chen, J., Huang, Y.F., 2013." Panel data analyses of the pecking order theory and the market timing theory of capital structure in Taiwan." International Review of Economics and Finance. 27, 1–13.


• De Jong, A., Verbeek, M., Verwijmeren, P., 2010. "The impact of financing surpluses and large financing deficits on tests of the pecking order theory." Financial Manage. 39, 733–756.


• Dierker, M., Lee, I., Won, S. S., 2019. "Risk changes and external financing activities: Tests of the dynamic trade-off theory of capital structure". Journal of Empirical Finance. 52, 178–200.


• Donaldson, G., 1961. Corporate debt capacity: a study of corporate debt policy and the determination of corporate debt capacity. Graduate School of Business Administration, Harvard University, Boston.


• Fama, E., French, K., 2005. "Financing decisions: Who issues stock?" Journal of Financial Economics 76, 549–582.


• Frank, M.Z., Goyal, V.K., 2003. "Testing the pecking order theory of capital structure". J. Financial Econ. 67, 217–248.


• Frank, M.Z., Goyal, V.K., 2009. "Capital Structure Decisions: Which Factors Are Reliably Important? Financ. Manag." 38 (1), 1-37.


• Gatchev, V.A., Spindt, P.A., Tarhan, V., 2009. "How do firms finance their investments? The relative importance of equity issuance and debt contracting costs." J. .Corporate Finance 15, 179–195


• James C. Van Horne, John M. Wachowicz. (2008). Fundamentals of financial management. Prentice Hall. 13th Ed.


• Modigliani, F., and M.H. Miller, 1958,” The cost of capital, corporate finance and the theory of investment”, American Economic Review 48, 261-297.


• Myers S.C. (2001), "Capital Structure", Journal of Economic Perspectives, 15 (2).


• Myers, S.C. Majluf, N.S. 1984. "Corporate financing and investment decisions when firms have information that investors do not have." J. Financial Econ. 13, 187–22.


• Rajan, R.G., Zingales, L., 1995. "What Do We Know about Capital Structure? Some Evidence from International Data." J. Financ. 50 (5), 1421-1460.


• Rashid, M., Johari, DK., Izadi, S., 2020. "National culture and capital structure of the Shariah compliant firms: Evidence from Malaysia, Saudi Arabia and Pakistan". International Review of Economics and Finance.


• Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe. (2010). Corporate finance. The McGraw-Hill/Irwin series in finance, insurance and real estate. 9th Ed.


• Shyam-Sunder, L., Myers, S.C., 1999. "Testing static tradeoff against pecking order models of capital structure." J. Financial Econo. 51, 219–244.