THE INTERNATIONAL EVIDENCE OF PECKING ORDER AND TRADE-OFF PREDICTIONS

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Nuttawat Visaltanachoti ORCID logo, Robin Luo, Cai Wei

https://doi.org/10.22495/cocv7i4c1p3

Abstract

This paper investigates the pecking order and trade-off hypotheses of corporate financing decisions for a sample of 74 countries from 1993 to 2003. Overall, the results confirm predictions shared by the trade-off and pecking order models in that the payout ratio is positively related to profitability and negatively related to investment opportunities, target leverage and volatility. The present study also provides favorable evidence to the pecking order model in that more profitable firms are less levered. Firms with more investments have lower long-term dividend payouts, but dividends do not vary to accommodate short-term variation in investment.

Keywords: Trade-Off, Pecking-Order, Target Dividend, Leverage

How to cite this paper: Visaltanachoti, N., Luo, R., Wei, C. (2010). The international evidence of pecking order and trade-off predictions. Corporate Ownership & Control, 7(4-1), 183-196. https://doi.org/10.22495/cocv7i4c1p3