The Ex-ante/Ex-post Perspectives of the Determinants of Capital Structure: An Integrated Analysis Approach
Journal of Finance and Accounting
Volume 5, Issue 1, January 2017, Pages: 12-23
Received: Dec. 20, 2016;
Accepted: Dec. 28, 2016;
Published: Jan. 21, 2017
Views 2974 Downloads 123
Tibuhinda Ngonzi, Department of Accountancy and Finance, St. Augustine University of Tanzania, Mwanza, Tanzania
Andrew Jisaba, Department of Accountancy and Finance, St. Augustine University of Tanzania, Mwanza, Tanzania
The implementation of capital structure decisions may take place at a point in time, while their effects are realized over time. The predisposition of the capital structure modifying factors as its ‘determining variables’ has an implication of posing the variables as drivers of capital structure decisions. However, the evidence research in corporate finance centres on determining variables ex-post at the influence of positive accounting theory and the presumptions of the tradeoff and pecking order theories. The impact of this perspective is realized in theoretical and operational controversies. This study uses ordinal regression to handle an integrated analysis of lagged variables on debt and investment opportunity financing and managerial subjective data to investigate their impact on capital structure. The outcome is such that there is no emergent pattern to suggest that there is any pecking order or capital structure monitoring, which drives decisions on capital structure a prior. The study suggests an understanding of the ‘determinants of capital structure’ as factors that operate in-situ to modify the proportions of capital and debt in assets through market driven financial transactions.
The Ex-ante/Ex-post Perspectives of the Determinants of Capital Structure: An Integrated Analysis Approach, Journal of Finance and Accounting.
Vol. 5, No. 1,
2017, pp. 12-23.
Al-taani, K. (2013). The relationship between capital structure and firm performance : evidence from Jordan. Journal of Finance, 1 (3), 41–45. doi:10.11648/j.jfa.20130103.11.
Amemiya, T. (1984). Tobit Models: A Survey. Journal of Econometrics, 24, 3–61.
Bekaert, G., Erb, C., Harvey, C., & Veskanta, T. (1998). Distributional characteristics of Emerging Markets Returns and Asset Allocation. The Journal of International Finance, (Winter), 102–116.
Chang, C., Lee, A. C., & Lee, C. F. (2009). Determinants of capital structure choice: A structural equation modeling approach. Quarterly Review of Economics and Finance, 49, 197–213. doi:10.1016/j.qref.2008.03.004.
Chen, J. J. (2004). Determinants of capital structure of Chinese-listed companies. Journal of Business Research, 57 (March 2003), 1341–1351. doi: 10.1016/S0148-2963(03)00070-5.
Chen, L. (2012). How the Pecking-Order Theory Explain Capital Structure. The Journal of International Management, 1–9. Retrieved from www.jimsjournal.org/10 Li-Ju Chenpdf.pdf.
de Jong, A., Kabir, R., & Nguyen, T. T. (2008). Capital structure around the world: The roles of firm- and country-specific determinants. Journal of Banking and Finance, 32, 1954–1969. doi:10.1016/j.jbankfin.2007.12.034.
Deesomsak, R., Paudyal, K., & Pescetto, G. (2004). The determinants of capital structure: Evidence from the Asia Pacific region. Journal of Multinational Financial Management, 14, 387–405. doi:10.1016/j.mulfin.2004.03.001
Fama, E. F., & French, K. R. (2002). Testing Trade-Off and Pecking Order Predictions about Dividends and Debt.pdf. The Review of Financial Studies, 15 (1), 1–33. doi:10.1093/rfs/15.1.1.
Frank, M., Goyal, V. (2009). Capital Structure Decisions: Which Factors Are Reliably Important ? Journal of Financial Management, 38 (1), 1-37.
Gharaibeh, A. (2015). The Determinants of Capital Structure: Empirical Evidence from Cuwait. European Journal of Business, Economics and Accountancy 3 (6), 1-25.
Hackbarth, D., Hennessy, C. a., & Leland, H. E. (2007). Can the trade-off theory explain debt structure? Review of Financial Studies, 20, 1389–1428. doi:10.1093/revfin/hhl047.
Huang, G., & Song, F. M. (2006). The determinants of capital structure: Evidence from China. China Economic Review, 17, 14–36. doi:10.1016/j.chieco.2005.02.007.
Irfan, A. (2011). Determinants of capital structure : Empirical evidence from Pakistan. University of Twente Enschede, Netherlands. Retrieved from http://ssrn.com/abstract=1977024.
Jensen, M. C., & Meckling, W. H. (1976). Teory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360.
Ju, N., Parrino, R., Poteshman, A. M., & Weisbach, M. S. (2005). Horses and Rabbits? Trade-Off Theory and Optimal Capital Structure. Journal of Financial and Quantitative Analysis, 40 (2), 259. doi:10.1017/S0022109000002301.
Kabir, H. (2010). Positive Accounting Theory and Science. Journal of Centrum Cathedra, 3(2), 136–149. Retrieved from https://scholar-google-co-za.ezproxy.uct.ac.za/scholar?q=positive+accounting+theory+and+science&btnG=&hl=en&as_sdt=0%2C5.
Klein, H. H. K., & Myers, M. D. M. (1999). A set of principles for conducting and evaluating interpretive field studies in information systems. MIS Quarterly, 23 (1), 67–93. doi:10.2307/249410.
Maddala, G. S. (2002). Introduction to Econometrics (3rd ed.). West Sussex, England: John Wiley & Sons.
Mukras, M. S. (1993). Elementary Econometrics: Theory Application and Policy. Nairobi, Kenya: East African Educational Publishers.
Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39 (3), 575–592.
Myers, S. C. (2001). Capital Structure. The Journal of Economic Perspectives 15 (2), 81–102. doi:10.1257/jep.15.2.81.
Ngonzi, T. (2016). Debating the “Evolution of Accounting Equation”: A Cross-Case Analysis Approach. Journal of Finance and Accounting, 4(4,2016), 179–187. doi:10.11648.
Ntui, P. P. (2013). Evolution of Accounting Equation: evidence of companies quoted on Dar es Salaam stock exchange - Tanzania. Journal of Finance and Accounting, 1 (4), 55–63. doi:10.11648/j.jfa.20130104.11.
Qian, Y., Tian, Y., & Wirjanto, T. S. (2009). Do Chinese publicly listed companies adjust their capital structure toward a target level? China Economic Review, 20 (4), 662–676. doi:10.1016/j.chieco.2009.06.001.
Rajan, R., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. The Journal of Finance, 50 (5), 1421–1460. doi:10.1111/j.1540-6261.1995.tb05184.x.
Rowlands, B. (2005). Grounded in Practice: Using Interpretive Research to Build Theory. The Electronic Journal of Business Research Methodology, 3 (1), 81–92.
Saudagaran, S. N., & Diga, J. (1997). Financial Reporting in Emerging Capital Markets. Accounting Horizons, 11 (2), 41–64.
Stock, J. H., & Watson, M. W. (2003). Introduction to Econometrics. Delhi, India: Pearson Education (Singapore) Pte. Ltd.
Tong, G., & Green, C. J. (2005). Pecking order or trade-off hypothesis? Evidence on the capital structure of Chinese companies. Applied Economics, 37 (July 2014), 2179–2189. doi:10.1080/00036840500319873.
Watts, R. L., & Zimmerman, J. L. (1990). Accounting Year Theory : Ten Perspective. Review Literature And Arts Of The Americas, 65 (1), 131–156. Retrieved from http://www.jstor.org/stable/247880.
Welch, I. (2007). Common flaws in empirical capital structure research. AFA 2008 New Orleans Meetings Paper. Retrieved from http://leeds-faculty.colorado.edu/Bhagat/welch-capital-structure.pdf.
Welch, I. (2011). Two Common Problems in Capital Structure Research: The Financial-Debt-To-Asset Ratio and Issuing Activity Versus Leverage Changes. International Review of Finance, 11(1), 1–17. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2443.2010.01125.x/full.
Williams, P. F., & Francis, J. (1989). The Logic of Positive Accounting Research. Accounting Organizations & Society 14 (5).