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Testing Static Tradeoff against Pecking Order Models of Capital Structure in Brazilian Firms

Author

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  • Otavio Ribeiro De Medeiros

    (Universidade de Brasilia, Brazil)

  • Cecilio Elias Daher

    (Universidade Estadual de Goias, Brazil)

Abstract

We test two models with the purpose of finding the best empirical explanation for the capital structure of Brazilian firms. The models tested were developed to represent the Static Tradeoff Theory and the Pecking Order Theory. The sample consists of firms listed in the Sao Paulo (Brazil) stock exchange from 1995 through 2002. By using panel data econometric methods, we aimed at establishing which of the two theories has the best explanatory power for Brazilian firms. The analysis of the outcomes led to the conclusion that the pecking order theory provides the best explanation for the capital structure of those firms.

Suggested Citation

  • Otavio Ribeiro De Medeiros & Cecilio Elias Daher, 2004. "Testing Static Tradeoff against Pecking Order Models of Capital Structure in Brazilian Firms," Finance 0412019, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0412019
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    Cited by:

    1. Seifert, Bruce & Gonenc, Halit, 2008. "The international evidence on the pecking order hypothesis," Journal of Multinational Financial Management, Elsevier, vol. 18(3), pages 244-260, July.
    2. Cziráki, Péter, 2007. "A tőkestruktúra empirikus vizsgálata a magyar és az osztrák tőzsdén jegyzett vállalatok körében [An empirical investigation of the capital structure of Austrian and Hungarian listed companies]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 703-715.
    3. TAHA Roshaiza & SANUSI Nur Azura, 2014. "Overview Of Capital Structure Theory," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 9(2), pages 108-116, August.
    4. Strike Mbulawa & Nathan F. Okurut & Mogale Ntsosa & Narain Sinha, 2020. "Optimal Capital Structure and Speed of Adjustment under Hyperinflation and Dollarization," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 12(2), pages 158-177, May.

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    More about this item

    Keywords

    capital structure; pecking order; static tradeoff; Brazilian firms;
    All these keywords.

    JEL classification:

    • G - Financial Economics

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