Macro uncertainties and tests of capital structure theories across renewable and non-renewable resource companies

Crawford School of Public Policy
Photo by N509FZ on Wikimedia Commons

Event details

PhD Seminar (Econ)

Date & time

Friday 28 May 2021


Online via Zoom


Denny Irawan

Capital structure is one of the most important decision firms need to make in doing business. This study examines the role of macro (economic and non-economic) uncertainties in affecting firms financing behaviour. Three prominent capital structure theories are tested, (1) Trade-Off, (2) Pecking Order, and (3) Market Timing. The tests are conducted to resource firms data in four resource sectors: (1) alternative energy; (2) forestry and paper; (3) mining; and (4) oil and gas producers. The dataset comprises unbalanced panel data of 2,669 companies in 75 countries worldwide during the 1987-2017 period in annual frequency. The results suggest pecking order theory as the leading theory, with downward cyclical patterns of pecking order coefficients observed among the companies. Furthermore, macro uncertainties at the global and country-level are significant in explaining firms’ financing behaviour, especially for firms in the non-renewable sector.

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