African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4194

Full Length Research Paper

The choices of capital structure

  Hsu-Ling Chang1, Hsin-Yu Liang2, Chi-Wei Su3* and Meng-Nan Zhu4
  1Department of Accounting and Information, Lin Tung University/Department of Finance, Xiamen University, China. 2Department of International Trade, Feng Chia University, Taichung, Taiwan. 3Department of International Trade, Tamkang University, Taipei, Taiwan.No.151, Yingzhuan Rd., Danshui Town, Taipei County 25137, Taiwan (R. O. C.)/Department of Finance, Xiamen University, China. 4Department of Finance, Xiamen University, China.
Email: [email protected]

  •  Accepted: 30 July 2010
  •  Published: 30 November 2010

Abstract

 

This study intends to examine the choices of capital structure from Taiwanese electronic firms. Empirical results here provide the evidence that Taiwanese electronic firms follow the different financing behaviour depending on the level of profitability. This study adopts two separated processes: First, we adopt Panel Unit Root Tests and find that under the different profitability the firms have different financing behaviors. Second, we adopt the model of Watson and Wilson (2002) to determine the order of the capital. We find out that the firms with a high level of profitability support the pecking order theory but the firms with a low profitability turn to support the static trade-off theory. However, the firms with the medium profitability cannot have any significant results. 

 

Key words: Capital structure, Trade-off theory, pecking order theory.

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This article is published under the terms of the Creative Commons Attribution License 4.0

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