Why do Firms Issue Equity?

Saumitra Bhaduri

Journal of Emerging Market Finance, 2015, vol. 14, issue 1, 59-85

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 article 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 article to test the pecking-order hypothesis. The study finds strong evidence in favour of the pecking-order hypothesis—a result that stands startlingly odd against the most recent evidence against the pecking-order theory in developed countries (Fama and French 2005; Frank and Goyal 2003; Leary and Roberts 2004; Lemmon and Zender 2004). JEL Classification: G32

Keywords: Pecking order; capital structure; emerging economy; India (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:14:y:2015:i:1:p:59-85

DOI: 10.1177/0972652714567996

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