Why do firms issue equity? Some evidence from an emerging economy, India

Saumitra Bhaduri

MPRA Paper from University Library of Munich, Germany

Abstract: In contrast to the existing empirical research on the pecking order hypothesis which has been largely confined to the United States and a few other advanced countries, this paper attempts to test the hypothesis for an emerging economy through a case study of the Indian Corporate sector. A well diverse sample of 556 manufacturing firms over the period 1997-2007 is used in the paper to test the pecking order hypothesis. The study finds strong evidence in favour of the pecking order hypothesis – a result that stands startlingly odd to the most recent evidences against pecking order theory in developed countries (Fama and French, (2005), Frank And Goyal (2003, Lemmon and Zender (2004), Leary and Roberts (2004)).

Keywords: Pecking order; Capital structure; emerging economy; India (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2012-04-10
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