Abstract
Much research has been conducted on the accuracy of the pecking order theory and the trade-off theory. Neither theory on its own has seemed to hold sufficient explanatory power to accurately describe capital structures. Chou et al. [Sun Yat-Sen Management Review, 19, 225-227 (2011)] proposed the signal factor hypothesis (SFH) which encompasses and integrates the two theories. Using hierarchical linear modeling (HLM), we verified the predictions of the SFH, proving that companies from Taiwan and China with low information symmetry have higher debt ratios than those with high information symmetry, and that profitability has a negative influence on capital structure regardless of the degree of the information asymmetry.
| Original language | English |
|---|---|
| Article number | 1650003 |
| Journal | Review of Pacific Basin Financial Markets and Policies |
| Volume | 19 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2016 Mar 1 |
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Keywords
- Capital structure
- HLM
- pecking order theory
- signal factor hypothesis
- trade-off theory
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
Cite this
Dynamic financial decisions with varying degrees of information asymmetry and profitability. / Lee, Chen Hsun; Ying, Frank Y.-H.; Chang, Koyin.
In: Review of Pacific Basin Financial Markets and Policies, Vol. 19, No. 1, 1650003, 01.03.2016.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Dynamic financial decisions with varying degrees of information asymmetry and profitability
AU - Lee, Chen Hsun
AU - Ying, Frank Y.-H.
AU - Chang, Koyin
PY - 2016/3/1
Y1 - 2016/3/1
N2 - Much research has been conducted on the accuracy of the pecking order theory and the trade-off theory. Neither theory on its own has seemed to hold sufficient explanatory power to accurately describe capital structures. Chou et al. [Sun Yat-Sen Management Review, 19, 225-227 (2011)] proposed the signal factor hypothesis (SFH) which encompasses and integrates the two theories. Using hierarchical linear modeling (HLM), we verified the predictions of the SFH, proving that companies from Taiwan and China with low information symmetry have higher debt ratios than those with high information symmetry, and that profitability has a negative influence on capital structure regardless of the degree of the information asymmetry.
AB - Much research has been conducted on the accuracy of the pecking order theory and the trade-off theory. Neither theory on its own has seemed to hold sufficient explanatory power to accurately describe capital structures. Chou et al. [Sun Yat-Sen Management Review, 19, 225-227 (2011)] proposed the signal factor hypothesis (SFH) which encompasses and integrates the two theories. Using hierarchical linear modeling (HLM), we verified the predictions of the SFH, proving that companies from Taiwan and China with low information symmetry have higher debt ratios than those with high information symmetry, and that profitability has a negative influence on capital structure regardless of the degree of the information asymmetry.
KW - Capital structure
KW - HLM
KW - pecking order theory
KW - signal factor hypothesis
KW - trade-off theory
UR - http://www.scopus.com/inward/record.url?scp=84964342025&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84964342025&partnerID=8YFLogxK
U2 - 10.1142/S021909151650003X
DO - 10.1142/S021909151650003X
M3 - Article
AN - SCOPUS:84964342025
VL - 19
JO - Review of Pacific Basin Financial Markets and Policies
JF - Review of Pacific Basin Financial Markets and Policies
SN - 0219-0915
IS - 1
M1 - 1650003
ER -