Comparing the Pecking Order Theory and the Trade-off Theory: Some UK Evidence
Luo, Man (2011) Comparing the Pecking Order Theory and the Trade-off Theory: Some UK Evidence. [Dissertation (University of Nottingham only)] (Unpublished)
This dissertation compares the pecking order theory and the trade-off theory by utilizing UK 47 companies from the FTSE 100 during the period of 2000 and 2009. Evidences observed show that the trade-off theory has more power of explaining the UK capital structure, and the partial adjustment model confirms that many companies tend to main an optimal target leverage and converge to the target quickly. On the other hand, when using the financial deficit model to investigate the pecking order theory, it fails to explain the change of debt. Finally, our research suggests the capital structure of US is different from that of UK. Thus, researchers should distinguish those two countries’ situation.
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