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Reconciling capital structure theories: How pecking order and tradeoff theories can be equated
Umeå University, Faculty of Social Sciences, Umeå School of Business.
2010 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

In this paper we study the pecking order and tradeoff theories of capital structure on a sample of 121 Swedish, non-financial, listed firms over the period between 2000 - 2009. We find that the Swedish firms’ financing behavior appears to have features consistent with the predictions of both theories. The evidence shows a preference for a financing behavior consistent with the tradeoff theory for the whole sample and for a sample of small firms, whereas large firms appear to follow a pecking order on their financing decisions. We show that under sufficient conditions both theories might be seen as “reconciled” and not mutually exclusive, and we find evidence for the large firms of our sample consistent with this notion.

Place, publisher, year, edition, pages
2010. , 47 p.
Keyword [en]
Capital structure, Pecking order theory, Tradeoff theory, Reconciliation, Mean reversion, Sweden
National Category
Business Administration
URN: urn:nbn:se:umu:diva-34930OAI: diva2:326965
Social and Behavioural Science, Law
Available from: 2010-06-28 Created: 2010-06-24 Last updated: 2010-07-02Bibliographically approved

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