Does dynamic trade-off theory explain Portuguese SME capital structure decisions?

Sardo, Filipe; Serrasqueiro, Zélia

doi:10.1108/jsbed-12-2016-0193

Cited by 27 publications

(43 citation statements)

References 51 publications

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“…Leary and Roberts (2005) and Byoun (2008) showed the firms consideration of transaction cost in their decision to readjust. Research conducted by Sardo and Serrasqueiro (2017) also showns that small and medium-sized Portuguese firms adjust both short and long term debt raties toward the target ratio. By adjusting the capital structure, the firms can get the benefit from a reduction in tax level with a minimized level of risk.…”

Section: Hypotheses Developmentmentioning

confidence: 86%

The Speed of Adjustment towards Optimal Capital Structure: A Test of Dynamic Trade-off Model

2019

JEM

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Capital structure remains to be a highly debated topic and the number of researches on the dynamic version of capital structure in Indonesia is very small. Besides, the inclusion of macroeconomic factors is even harder to locate. This paper analyzes the financing behaviour of non-financial firms in Indonesia. The objective is to measure the adjustment speed of the firms toward the optimal capital structure. Partial Adjustment Model (PAM) was used to analyzed the data. It is expected that non-financial firms in Indonesia possess a target leverage and make partial adjustments toward the target over time. The empirical findings from 250-panel data observation revealed that tangibility and firm's size had a positive and significant relationship with target leverage. In addition, macroeconomic variables (GDP growth and inflation rate) were found to be negatively correlated with the firm's speed of adjustment. Finally, the result shows that non-financial firms in Indonesia readjusted toward their target leverage at a speed rate of approximately 57.44% a year. These evidences conclude that the financing behaviour of non-financial firms in Indonesia tended to follow the dynamic trade-off theory.

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Section: Hypotheses Developmentmentioning

confidence: 86%

The Speed of Adjustment towards Optimal Capital Structure: A Test of Dynamic Trade-off Model

2019

JEM

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“…Many researchers have investigated the behavior of firms' capital structure aiming at detecting whether pecking order or trade -off hypothesis can better explain this behavior, but their results are contradictory. Using various methods, some of them conclude that pecking order hypothesis is dominant (Macas Nunes & Serrasqueiro, 2017;Trinh et al, 2017;Pacheco, 2016;Balios et al, 2016;Atiyet, 2012;Sheikh et al, 2012;Vijayakumar, 2011), while others support the superiority of trade -off theory over pecking order hypothesis (Sardo & Serrasqueiro, 2017;Rossi et al, 2015;Wang, 2013). Below, some of these surveys are presented, while a much more detailed presentation may be seen in Martinez et al (2018).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Finally, the Portuguese firms' capital structure behavior is investigated by many researchers, the majority of who agree that the pecking order hypothesis can better explain the financing decisions of firms' managers (Macas Nunes & Serrasqueiro, 2017; Pacheco, 2016). However, some other scholars conclude that the Portuguese firms choose their financial mix in accordance to trade -off theory (Sardo & Serrasqueiro, 2017) or that both theories can explain adequately their capital structure behavior (Pacheco and Tavares, 2017;Serrasqueiro and Caetano, 2015).…”

Section: Presentation Of Countries: Environment and Firms' Capital Stmentioning

confidence: 99%

Untitled

2018

Eur. j. econ. bus. stud.

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Designing and adapting organizations to secure viability and increase performance is a challenge. Research models often fail to integrate corporate social responsibility (CSR) aspects in the concept development and its implementation. Therefore, the aim of this study is to propose a holistic approach how organizations can be designed, changed and managed considering its implications to service management under a CSR approach. Hereby the Viable System Model was applied. Its structure can be applied to any kind of structured organization and for its management with goals to be achieved in modern society; however focus of the research is the cluster of charity organizations. Goal of the developed model is to be able to react to all potential organizational environments by taking decisions correctly and in the right moment based on the needed information reducing service lead times and manpower allocation as well as increasing the service level. To ensure this, service management tasks were assigned and standardized communication channels were defined. In conclusion this proposed approach empowers organizations to have internal mechanisms to secure viability by pursuing the goal of a high performance CSR approach. Service management tasks according to planning horizon levels Definition of recursion levels within a service organizationService management tasks and their classification to the VSM systems Identification of the needed information flows between organization and service recursion levels and within the service management level Applying the model for charity organizations After having described the methodology, the VSM as a reference model is compared with other approaches. As described ISSN 2411-9571 (Print) ISSN 2411

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“…Many researchers have investigated the behavior of firms' capital structure aiming at detecting whether pecking order or trade -off hypothesis can better explain this behavior, but their results are contradictory. Using various methods, some of them conclude that pecking order hypothesis is dominant (Macas Nunes & Serrasqueiro, 2017; Trinh et al, 2017; Pacheco, 2016; Balios et al, 2016; Atiyet, 2012; Sheikh et al, 2012; Vijayakumar, 2011), while others support the superiority of trade -off theory over pecking order hypothesis (Sardo & Serrasqueiro, 2017;Rossi et al, 2015;Wang, 2013). Below, some of these surveys are presented, while a much more detailed presentation may be seen in Martinez et al (2018).…”

Section: Literature Reviewmentioning

confidence: 99%

Section: Table I Gdp Annual Growth Profit Tax Total Tax Rate and Amentioning

confidence: 99%

Pecking Order and Trade – off Capital Structure Theories in the European Countries Supported by European Stability Mechanism

Chatzinas¹,

Markopoulou²,

Papadopoulos³

2018

European Journal of Economics and Business Studies

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The financial assistance provided by European Stability Mechanism during the recent European crisis was accompanied with severe austerity measures and strict reforms that changed significantly the economic environment in the countries that accepted it. The present study examines whether these changes affected the capital structure of the European firms in these countries. Using accounting data for firms in Cyprus, Greece, Ireland and Portugal, the researchers created a balanced panel database and applied the Shyam-Sunders and Myers (1999) methodology to investigate whether pecking order or trade-off hypotheses can better explain the financing decision of the firms in these countries during the period before and after the outset of the ESM financial assistance. The results indicate that the firms’ capital structure decisions are explained by both theories in Greece, Cyprus and Portugal before the beginning of the EMS program, while only by trade-off in Ireland. On the other hand, after the beginning of the ESM program the firms’ capital structures are better explained by trade-off hypothesis in Greece and Cyprus, while nothing changed in cases of Ireland and Portugal. The fact that Greek and Cypriot tax rates increased the most among the four examined countries may explain at least partially the above differentiations. So, the economic environment is a primary factor that affects the explanatory power of each capital structure theory. Moreover, a change in economic environment may lead to a change in the dominant capital structure theory.

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Does dynamic trade-off theory explain Portuguese SME capital structure decisions?

Cited by 27 publications

References 51 publications

The Speed of Adjustment towards Optimal Capital Structure: A Test of Dynamic Trade-off Model

The Speed of Adjustment towards Optimal Capital Structure: A Test of Dynamic Trade-off Model

Untitled

Pecking Order and Trade – off Capital Structure Theories in the European Countries Supported by European Stability Mechanism

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