Corporate Debt Behavior in South Africa: Pecking Order or Target Adjustment?

Posted: 19 May 2008

See all articles by Chia Chao Wu

Chia Chao Wu

affiliation not provided to SSRN

Minga Negash

Metropolitan State University of Denver; University of the Witwatersrand

Date Written: 2002

Abstract

Traditional trade off models of capital structure advocated that the gains from leverage be balanced against the potential costs of distress and bankruptcy. More recent studies however show that the trade off theory does not fully explain the behavior of South African managers. Using JSE industrial sector data, this paper replicates the Shyam-Sunder and Myers (1999) work to identify whether trade off theory or pecking order theory explains the behavior of South African managers better. Results indicated that both models are useful, but pecking order dominates the target adjustment model for small sized firms.

Keywords: capital structure, pecking order, target adjustement, Johanesburg stock exchange

Suggested Citation

Wu, Chia Chao and Negash, Minga, Corporate Debt Behavior in South Africa: Pecking Order or Target Adjustment? (2002). Available at SSRN: https://ssrn.com/abstract=1134265

Chia Chao Wu (Contact Author)

affiliation not provided to SSRN

Minga Negash

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

University of the Witwatersrand

1 Jan Smuts Avenue
Johannesburg, GA Gauteng 2000
South Africa

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