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Testing the Pecking Order Theory of Capital Structure in FTSE 350 Food Producers Firms in United Kingdom between 2001 and 2005

Author

Listed:
  • Louie DACOSTA

    (MBA (Finance) and FCCA, London, England)

  • Charles ADUSEI

    (Garden City University College, Ghana)

Abstract

This paper tests the Pecking Order Theory to see if it best explains the financing behaviour of FTSE 350 UK Food producer firms from the time period of 2001 to 2005. A multiple case study design was used. However, the study approach was retrospective in nature. The Pecking order model as proposed by Shyam-Sunder and Myers, Frank and Goyal; and Rajan and Zingales, was followed in this research. The empirical analysis of firm-year data was compared to a generalised view of the literature to enable an assessment of the commonalities and differences observed. The results suggest that although there is some form of Pecking order behaviour amongst FTSE 350 UK food producer firms, especially when it comes to managers’ preference for the different sources of finance, their financing behaviour is best explained by the trade-off theory of capital structure.

Suggested Citation

  • Louie DACOSTA & Charles ADUSEI, 2016. "Testing the Pecking Order Theory of Capital Structure in FTSE 350 Food Producers Firms in United Kingdom between 2001 and 2005," Expert Journal of Finance, Sprint Investify, vol. 4, pages 66-91.
  • Handle: RePEc:exp:finnce:v:4:y:2016:i::p:66-91
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Pecking Order Theory; Trade-Off Theory; FSTE 350 Food Sector; Capital Structure; United Kingdom;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco

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