Testing pecking order theory against static tradeoff theory : The case of construction companies listed on HOSE from 2010 to 2014
Abstract
The objective of this research is to review and analyze two significant
theories of capital structure field which are the pecking order theory and the
static trade-off theory. Employing a sample of 25 Vietnamese construction
companies listed on Ho Chi Minh Stock Exchange (HOSE) over a period from
2010 to 2014. This paper uses panel data based on the model of Shyam-Sunder
& Myers (1999) and Chirinko & Singha (2000). The conclusions state that
pecking order theory and static trade-off theory cannot illuminate behavioral
finance in capitalizing of Vietnam construction firms. The pecking order’s semi
strong form model explains financing behaviors of observed firms and indicates
positive relationship between funds flow deficit and adjustment of issuing stock.