• Login
    View Item 
    •   Research Bank Home
    • Unitec Institute of Technology
    • Study Areas
    • Accounting and Finance
    • Accounting and Finance Conference Papers
    • View Item
    •   Research Bank Home
    • Unitec Institute of Technology
    • Study Areas
    • Accounting and Finance
    • Accounting and Finance Conference Papers
    • View Item
    JavaScript is disabled for your browser. Some features of this site may not work without it.

    Capital Structure and Financing Choices in Australia

    Buhr, Klaus; Cross, Roy; Rainsbury, Liz

    Thumbnail
    Share
    View fulltext online
    288.pdf (523.1Kb)
    Date
    2012
    Citation:
    Buhr, K., Cross, R., and Rainsbury, E. (2012). Capital Structure and Financing Choices in Australia. World Finance & Banking Symposium. 17-18 December, Shanghai, China.
    Permanent link to Research Bank record:
    https://hdl.handle.net/10652/2115
    Abstract
    We use a modified pecking order framework to analyse financing choices for Australian firms. The traditional pecking order model has been extended to allow a non-linear relationship between a firm’s requirements for external capital (the financial deficit) and the amount of external debt used to meet these requirements. The pecking order theory predicts that firms will follow a defined hierarchy of financing choices with internal funds being used first, followed by external debt and as a last resort the issuance of external equity. Our main finding is that Australian firm’s do not follow the pecking order as closely as in other markets as the model explains less of the variation in debt issuance. Importantly, we find that this is not related to debt capacity constraints, which has been hypothesized by other researchers as a legitimate reason why firms, small firms in particular, would not appear to be following the pecking order theory. We use Altman’s Z-Score, which is a commonly used measure of financial distress, to identify firms that are relatively unconstrained in terms of debt capacity. We also find that while controlling for debt capacity does improve the explanatory power of our model, the improvement is only marginal. We do find evidence against the static trade-off theory of capital structure. In particular firms that are unconstrained in terms of debt capacity and not facing significant capital expenditure do not increase leverage towards an optimal capital structure in the manner predicted by the static trade-off theory.
    Keywords:
    framework analysis, financing choices, Australia
    ANZSRC Field of Research:
    140207 Financial Economics
    Copyright Holder:
    Author

    Copyright Notice:
    All rights reserved
    Rights:
    This digital work is protected by copyright. It may be consulted by you, provided you comply with the provisions of the Act and the following conditions of use. These documents or images may be used for research or private study purposes. Whether they can be used for any other purpose depends upon the Copyright Notice above. You will recognise the author's and publishers rights and give due acknowledgement where appropriate.
    Metadata
    Show detailed record
    This item appears in
    • Accounting and Finance Conference Papers [70]

    Te Pūkenga

    Research Bank is part of Te Pūkenga - New Zealand Institute of Skills and Technology

    • About Te Pūkenga
    • Privacy Notice

    Copyright ©2022 Te Pūkenga

    Usage

    Downloads, last 12 months
    15
     
     

    Usage Statistics

    For this itemFor the Research Bank

    Share

    About

    About Research BankContact us

    Help for authors  

    How to add research

    Register for updates  

    LoginRegister

    Browse Research Bank  

    EverywhereInstitutionsStudy AreaAuthorDateSubjectTitleType of researchSupervisorCollaboratorThis CollectionStudy AreaAuthorDateSubjectTitleType of researchSupervisorCollaborator

    Te Pūkenga

    Research Bank is part of Te Pūkenga - New Zealand Institute of Skills and Technology

    • About Te Pūkenga
    • Privacy Notice

    Copyright ©2022 Te Pūkenga