Corporate financing decisions: UK survey evidence

Beattie, V., Goodacre, A. and Thomson, S.J. (2006) Corporate financing decisions: UK survey evidence. Journal of Business Finance and Accounting, 33(9-10), pp. 1402-1434. (doi: 10.1111/j.1468-5957.2006.00640.x)

Abstract

Despite theoretical developments in recent years, our understanding of corporate capital structure remains incomplete. Prior empirical research has been dominated by archival regression studies which are limited in their ability to fully reflect the diversity found in practice. The present paper reports on a comprehensive survey of corporate financing decision-making in UK listed companies. A key finding is that firms are heterogeneous in their capital structure policies. About half of the firms seek to maintain a target debt level, consistent with trade-off theory, but 60 per cent claim to follow a financing hierarchy, consistent with pecking order theory. These two theories are not viewed by respondents as either mutually exclusive or exhaustive. Many of the theoretical determinants of debt levels are widely accepted by respondents, in particular the importance of interest tax shield, financial distress, agency costs and also, at least implicitly, information asymmetry. Results also indicate that cross-country institutional differences have a significant impact on financial decisions.

• Item Type: Articles
• Additional Information: Available at www.blackwell-synergy.com
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Beattie, Prof Vivien
• Authors: Beattie, V., Goodacre, A., and Thomson, S.J.
• Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Journal of Business Finance and Accounting
• Publisher: Blackwell Publishing
• ISSN: 0306-686X
• Copyright Holders: Copyright © 2006 Blackwell Publishing
• First Published: First published in Journal of Business Finance and Accounting 33(9-10):1402-1434
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher