IDEAS home Printed from
   My bibliography  Save this article

Consistency and controversy in corporate financing practices: Evidence from an emerging market


  • Sisira R.N. Colombage


Purpose - The main aim of this paper is to report on a comprehensive survey of corporate financing decision-making process in Sri Lankan listed companies and to compare these results with those of similar studies conducted in developed markets. Design/methodology/approach - The study was based on a survey questionnaire distributed among the chief executive officers (CEOs) of companies listed on the Colombo Stock Exchange, with the content of the questionnaire being based upon a review of theoretical and empirical literature in the field of finance. Findings - The results demonstrate an adherence to a financial hierarchy, which appears to be the dominant financial policy among listed Sri Lankan companies. Corporate financing decisions seem to be influenced mostly by interest and tax considerations, while lesser weight is accorded to financial flexibility in determining the amount of funds to be raised externally through debt contracts. The evidence largely supports the propositions of the pecking order model, but also confirms some predictions found in static trade-off theory. Practical implications - Some of the most striking implications of the analysis relate to the under-development of the local capital market, and the apparent need for an efficient financial system that spurs economic growth. An efficient capital market will in turn ensure that capital will be more easily channeled into financing investments. Originality/value - This paper highlights how and why the determinants of capital structure decisions reported for developed capital markets may differ from those existing in transitional or emerging economies.

Suggested Citation

  • Sisira R.N. Colombage, 2007. "Consistency and controversy in corporate financing practices: Evidence from an emerging market," Studies in Economics and Finance, Emerald Group Publishing, vol. 24(1), pages 51-71, March.
  • Handle: RePEc:eme:sefpps:v:24:y:2007:i:1:p:51-71

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Corporate finances; Emerging markets; Sri Lanka;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:24:y:2007:i:1:p:51-71. 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: (Virginia Chapman). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.