DEVIATION FROM TARGET DEBT RATIO, CASH FLOW IMBALANCE AND CAPITAL STRUCTURE ADJUSTMENT

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DAVALLOU MARYAM; REZAEIAN ALIREZA

مرکز اطلاعات علمی Scientific Information Database (SID) - Trusted Source for Research and Academic Resources

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Journal: FINANCIAL RESEARCH Year:2016 | Volume:18 | Issue:2 Page(s): 287-306

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Information Journal Paper

Title

DEVIATION FROM TARGET DEBT RATIO, CASH FLOW IMBALANCE AND CAPITAL STRUCTURE ADJUSTMENT

Author(s)

DAVALLOU MARYAM | REZAEIAN ALIREZA | Issue Writer Certificate

Keywords

CAPITAL STRUCTUREQ2

CASH FLOW IMBALANCEQ2

PECKING ORDER THEORYQ1

TRADE-OFF THEORYQ1

Abstract

Most of CAPITAL STRUCTURE researches have been conducted on the two dominant theories: trade-off and pecking order. Based on the TRADE-OFF THEORY, every firm has a target CAPITAL STRUCTURE, while PECKING ORDER THEORY assumes that there is no target CAPITAL STRUCTURE and firms follow a specific financing hierarchy. Many empirical evidence shows that such theories, which have been largely evaluated in isolation from one another, should be viewed as complements. This research aims to study a CAPITAL STRUCTURE adjustment framework in which basic intuition of both pecking order and trade-off theories have been considered and also effect of external financing needs examined in CAPITAL STRUCTURE decisions. Our sample consists of 155 companies listed in Tehran Stock Exchange for the period from 1384 to 1393. Using panel data analysis and mixed effect method, we find that most adjustments occur when firms have above-target (below-target) debt with financial surplus (deficit). Moreover, firms with above-target debt use more amount of their financial surplus to pay off debt compared to ones with below-target debt.

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APA: Copy

DAVALLOU, MARYAM, & REZAEIAN, ALIREZA. (2016). DEVIATION FROM TARGET DEBT RATIO, CASH FLOW IMBALANCE AND CAPITAL STRUCTURE ADJUSTMENT. FINANCIAL RESEARCH, 18(2 ), 287-306. SID. https://sid.ir/paper/91221/en

Vancouver: Copy

DAVALLOU MARYAM, REZAEIAN ALIREZA. DEVIATION FROM TARGET DEBT RATIO, CASH FLOW IMBALANCE AND CAPITAL STRUCTURE ADJUSTMENT. FINANCIAL RESEARCH[Internet]. 2016;18(2 ):287-306. Available from: https://sid.ir/paper/91221/en

IEEE: Copy

MARYAM DAVALLOU, and ALIREZA REZAEIAN, “DEVIATION FROM TARGET DEBT RATIO, CASH FLOW IMBALANCE AND CAPITAL STRUCTURE ADJUSTMENT,” FINANCIAL RESEARCH, vol. 18, no. 2 , pp. 287–306, 2016, [Online]. Available: https://sid.ir/paper/91221/en

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