Testing the pecking order theory and the static tradeoff theory of capital structure of companies listed on Ho Chi Minh stock exchange

Abstract

In this study, I examine two models (the pecking order and the static tradeoff) with the purpose of finding the best empirical explanation for corporate financing decision of companies listed on Ho Chi Minh Stock Exchange (HOSE) from 2016 to 2018. This research uses secondary data collected by hand from financial reports of 274 firms (financial companies, as well as the ones with missing data are excluded). By using panel data econometrics methods and STATA, this thesis targeted at identifying which of these two principles gives the best explanatory power for companies on HOSE. The study led to the result that the static tradeoff generates better demonstration for capital structure of those companies.