The Theory of Capital Structure: Signal Factor Hypothesis
| Autor: | Chen-Hsun Lee, 李臻勳 |
|---|---|
| Rok vydání: | 2010 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 98 The primary purpose of this paper is to use a combination of trade off and pecking order theories to gain a better understanding of how information asymmetry affect capital structure of Taiwan-listed companies. Pecking order theory has previously documented the failure of trade off theory to capture the optimal capital structure within the context of regression methodology over the last few decades. However, financing decisions seem to still violate the central prediction of the pecking order model regarding a firm’s financing behavior. As a result, this article extended the study by Chang, Lee, & Lee (2009). By applying structural equation modeling (SEM), this research proposed a parsimony model called the named signal factor hypothesis based on current capital structure theories. In the first stage, in accordance with the literature reviews of the capital structure, we initially identified seven determinants and then divided these into two categories: "real factors," which are representatives of the company''s actual management, profitability and growth conditions, including profitability, debt-paying ability, and growth; "signal factors," which have the information a company discloses to external investors, including tangible assets, firm size, dividend policy, and industry. With the capital structure measured by the book ratio of total debt to the market total asset, our results show that the real factors are the most important determinants of capital structure choice in Taiwan-listed companies. Another objective of the research is to propose a comprehensive theoretical model called the signal factor hypothesis model, which combines both the trade off and pecking order theories. In the signal factor hypothesis model, firms identify target leverage by weighing the benefits between additional dollar of debt and equity. The signal factor hypothesis has provided the two competing models with an opportunity to cooperate. This paper provides evidence of how asymmetric information conditions affect capital structure choice. It also rationalizes other aspects of corporate borrowing behavior, for example the pecking order, optimal capital structure and adjustment of capital structure toward target. An empirical study is tested by using the structural equation modeling technique in the nonfinancial industries of Taiwan-listed companies. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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