Sustainability of both pecking order and trade-off theories in chinese manufacturing firms

20Citations
Citations of this article
108Readers
Mendeley users who have this article in their library.

Abstract

Our study investigates Chinese manufacturing firms listed on both the Shanghai and the Shenzhen Stock Exchanges. These firms follow the pecking order or trade-off theories in their capital structure choices. Using panel data from the Taiwan Economic Journal and quantile regression, we construct three models to compare the two theories. Our first model tests the impact of profitability, tangible asset, firm size, and investment opportunities on leverage; our second model adds the dividend payout ratio to test the robustness of the first model; and our third model tests how leverage, profitability, firm size, and dividend variables affect a firm's investments. From the results of all the models used in our study, we find a negative relationship between leverage and both profitability and the dividend payout ratio and a positive relationship between leverage and growth in a firm's investments. We also find a negative relationship between dividends, firm size, and growth in a firm's investments and a positive relationship between investment capital and profitability. The overall results indicate that the capital structure decisions of Chinese manufacturing firms are best explained by the pecking order theory.

Cite

CITATION STYLE

APA

Nguyen, H. M., Giang Vuong, T. H., Nguyen, T. H., Wu, Y. C., & Wong, W. K. (2020). Sustainability of both pecking order and trade-off theories in chinese manufacturing firms. Sustainability (Switzerland), 12(9). https://doi.org/10.3390/su12093883

Register to see more suggestions

Mendeley helps you to discover research relevant for your work.

Already have an account?

Save time finding and organizing research with Mendeley

Sign up for free