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Testing the pecking order theory of capital structure - focus on Indian growth firms 1991-2009

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  • Sachin Choudhry
  • D.S. Meenakshi Sundaram

Abstract

The pecking order theory, as originally conceived, based its findings on the practices of US corporations. But do companies across the globe follow the pecking order pattern while financing their expansions? This study, therefore, focuses to test the pecking order theory on Indian firms with special emphasis on the high growth Indian firms. The period under study is 1991-2009. Secondary data from CMIE for nine sectors of the economy viz. cement, construction, petroleum, textile, commercial vehicles, fast moving consumer goods, hotel, software and steel have been collated. These sectors were found to be high growth sectors. Specifically, data related to reserves, term debt and assets were correlated. Empirical evidence suggests that the implications of pecking order theory as per Myers (1984) does not quite hold true in the Indian scenario.

Suggested Citation

  • Sachin Choudhry & D.S. Meenakshi Sundaram, 2013. "Testing the pecking order theory of capital structure - focus on Indian growth firms 1991-2009," International Journal of Indian Culture and Business Management, Inderscience Enterprises Ltd, vol. 6(3), pages 330-350.
    • Handle: RePEc:ids:ijicbm:v:6:y:2013:i:3:p:330-350
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    Cited by:

    1. Bojana Vukovic & Suncica Milutinovic & Nikola Milicevic & Dejan Jaksic, 2020. "The Analysis of Indebtedness of Retail Companies in the Balkan Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 83-104.

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