Are Trade-off and Pecking Order Theories of Capital Structure Mutually Exclusive?; Evidence from Indian Manufacturing Companies

Mukherjee, Sulagna and Mahakud, Jitendra (2012) Are Trade-off and Pecking Order Theories of Capital Structure Mutually Exclusive?; Evidence from Indian Manufacturing Companies. Journal of Management Research, 12 (1). pp. 41-45.

Text A188_Sulagna_Mukherjee_Are trade-off and Pecking order Theories of capital structure mutually exclusiveJournal of Management Research April 2012.pdf Restricted to Registered users only Download (233kB) | Request a copy

Abstract

The objective of the paper is to find out whether the trade-off and pecking order theories are mutually exclusive or complimentary to each other in determining the optimal capital structure of the Indian manufacturing companies during the period 1993-94 to 2007-08. We find that the trade-off and pecking order theories are complimentary to each other to determine the capital structure and therefore, companies’ financing behavior is best explained by the modified pecking order theory. We also find that Indian manufacturing companies do have target leverage ratios and the adjustment speed towards the target has been around 40 percent.

Item Type:	Article
Uncontrolled Keywords:	Trade-off theory;modified pecking order theory;target leverage ratio;adjustment speed
Subjects:	Economics Finance > Capital Markets/Stock Marketing Operations Management
Divisions:	Finance and Strategy
Depositing User:	Mr Ramesh Kamath
Date Deposited:	23 Sep 2018 13:31
Last Modified:	23 Sep 2018 13:31
URI:	http://tapmi.informaticsglobal.com/id/eprint/133

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