Testing the pecking order theory of capital structure - focus on Indian growth firms 1991-2009

Sachin Choudhry and D.S. Meenakshi Sundaram

International Journal of Indian Culture and Business Management, 2013, vol. 6, issue 3, 330-350

Abstract: The pecking order theory, as originally conceived, based its findings on the practices of US corporations. But do companies across the globe follow the pecking order pattern while financing their expansions? This study, therefore, focuses to test the pecking order theory on Indian firms with special emphasis on the high growth Indian firms. The period under study is 1991-2009. Secondary data from CMIE for nine sectors of the economy viz. cement, construction, petroleum, textile, commercial vehicles, fast moving consumer goods, hotel, software and steel have been collated. These sectors were found to be high growth sectors. Specifically, data related to reserves, term debt and assets were correlated. Empirical evidence suggests that the implications of pecking order theory as per Myers (1984) does not quite hold true in the Indian scenario.

Keywords: pecking order theory; capital structure; year-on-year asset growth; year-on-year reserve growth; year-on-year long-term debt growth; year-on-year share capital growth; correlation; India. (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.inderscience.com/link.php?id=53106 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijicbm:v:6:y:2013:i:3:p:330-350

Access Statistics for this article

More articles in International Journal of Indian Culture and Business Management from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().