Do Tanzanian Companies Practice Pecking Order Theory, Agency Cost Theory or Trade-Off Theory? An Empirical Study in Tanzanian Listed Companies
The empirical study was focused predominantly on validity tests of the three theories on capital structures, the static trade-off theory, the pecking order theory (information asymmetry theory), and agency cost theory in the Tanzanian context. The study used secondary data from eight of the non-financial companies listed in Dar Es Salaam Stock Exchange (DSE) from 2006-2012. The study used descriptive (quantitative) approach to test the practicality of the theories in Tanzania. The multiple regressions model used to test the theoretical relationship between the financial leverage and characteristics of the company. The research found that there is no strong evidence for validation of static trade off theory, little support of pecking order theory, but the agency cost theory is confirmed to be valid and practiced in Tanzania. It recommended that Tanzanian companies should be adhering to the determinants of the capital structure in the Tanzanian context found by this study
Volume (Year): 2 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.econjournals.com |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan B. Berk & Richard Stanton & Josef Zechner, 2007.
"Human Capital, Bankruptcy and Capital Structure,"
NBER Working Papers
13014, National Bureau of Economic Research, Inc.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Booth, L. & Asli Demirgu-Kunt, V.A. & Maksimovic, V., 1999.
"Capital Structure in Developing Countries,"
Rotman School of Management - Finance
00-001, Rotman School of Management, University of Toronto.
- Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
- Frank, Murray Z. & Goyal, Vidhan K., 2003. "Testing the pecking order theory of capital structure," Journal of Financial Economics, Elsevier, vol. 67(2), pages 217-248, February.
- Raghuram G. Rajan & Luigi Zingales, 1994.
"What Do We Know About Capital Structure? Some Evidence from International Data,"
NBER Working Papers
4875, National Bureau of Economic Research, Inc.
- Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
- Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
- Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
- Alan Bevan & Jo Danbolt, 2002. "Capital structure and its determinants in the UK - a decompositional analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 12(3), pages 159-170.
- Ivo Welch, 2004.
"Capital Structure and Stock Returns,"
Journal of Political Economy,
University of Chicago Press, vol. 112(1), pages 106-131, February.
- Harris, Milton & Raviv, Artur, 1989. "The design of securities," Journal of Financial Economics, Elsevier, vol. 24(2), pages 255-287.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Murray Z. Frank & Vidhan K. Goyal, 2009.
"Capital Structure Decisions: Which Factors Are Reliably Important?,"
Financial Management Association International, vol. 38(1), pages 1-37, 03.
- Frank, Murray Z. & Goyal, Vidhan K., 2009. "Capital Structure Decisions: Which Factors are Reliably Important?," MPRA Paper 22525, University Library of Munich, Germany.
- Chen, Jean J., 2004. "Determinants of capital structure of Chinese-listed companies," Journal of Business Research, Elsevier, vol. 57(12), pages 1341-1351, December.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Bradley, Michael & Jarrell, Gregg A & Kim, E Han, 1984. " On the Existence of an Optimal Capital Structure: Theory and Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 857-78, July.
- Nevins D. Baxter, 1967. "Leverage, Risk Of Ruin And The Cost Of Capital," Journal of Finance, American Finance Association, vol. 22(3), pages 395-403, 09.
- Frankfurter, George M. & Philippatos, George C., 1992. "Financial theory and the growth of scientific knowledge: From Modigliani and Miller to "an organizational theory of capital structure"," International Review of Financial Analysis, Elsevier, vol. 1(1), pages 1-15.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Deesomsak, Rataporn & Paudyal, Krishna & Pescetto, Gioia, 2004. "The determinants of capital structure: evidence from the Asia Pacific region," Journal of Multinational Financial Management, Elsevier, vol. 14(4-5), pages 387-405.
- Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September.
When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2012-04-4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilhan Ozturk)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.