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Pecking Order Test at Varying Debt Levels: A Comparative Study of Indian and Chinese Firms

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  • Vandana Bhama
  • Pramod Kumar Jain
  • Surendra Singh Yadav

Abstract

The present study tests the pecking order of firms at varying debt levels. The findings indicate that deficit firms at low debt levels raise significant amounts of debt, thus indicating the adherence to the pecking order theory. Deficit firms (from both countries) at exceptionally high debt levels do not adjust their capital structure by issuing less debt. In a surplus situation, Chinese firms at very high level redeem the substantial debt because of the dominance of short-term debt in their capital structure. In contrast, Indian surplus firms hesitate to redeem more debt if their existing debt levels are extremely high. JEL Classification: Q14, G32

Suggested Citation

  • Vandana Bhama & Pramod Kumar Jain & Surendra Singh Yadav, 2019. "Pecking Order Test at Varying Debt Levels: A Comparative Study of Indian and Chinese Firms," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(2), pages 237-261, August.
    • Handle: RePEc:sae:emffin:v:18:y:2019:i:2:p:237-261
    DOI: 10.1177/0972652719846317
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    More about this item

    Keywords

    China; debt; India; pecking order theory;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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