Analysis of the capital structure: an empirical study of listed companies in UK
Huo, Erman (2011) Analysis of the capital structure: an empirical study of listed companies in UK. [Dissertation (University of Nottingham only)] (Unpublished)
The two competing models of financial investment decisions, the trade-off and pecking order models, share many predictions of financial leverage. The former indicates that firms gradually adjust the debt-equity ratio towards an optimum. The latter predicts that external financing is driven by financial deficit of internal funding. The basic pecking order model seems to have more time-series explanatory power than static trade-off model. These two models are contradicting on hypothesis of leverage variation driven by some variables. This paper tests the traditional trade-off model against the pecking order model of corporate financing in UK listed firms. It is shown that this test provides mixed evidence for the dominance of these two models.
Actions (Archive Staff Only)