• The Investigation of the Influential Literature Analysis on The Pecking Order Theory researches the categorisation provided in the first assignment of this course. The focus is on explaining how authors of influential articles contributed to the evolution of this research approach.
• Based on the categorisation the papers are evaluated by highlighting their core research approach and result. In a next step this paper tries to link the approaches to present and overall picture of the underlying research area. The author introduces several hypotheses that are tested with help of empirical findings in different papers.
• The Pecking Order Theory is a theoretical concept used in finance research and business related articles. This paper shows that the theory cannot be rejected but is not fully supported. The finance decision of a company are complex and linked with its own history a single concept has not the explanatory power to give a reliable answer.
• Academic articles mainly focus on theoretical concepts. These concepts are not able to reflect the real business world. By trying to get an insight into business, the authors limit themselves by choosing data sets for special areas, companies and period of times only.
• Future research approach need to link the dynamic financial decisions of a company with a more flexible approach towards explaining the capital structure of a firm. Dynamic models are the key to get a reliable insight into managerial behaviour.
• This paper gives a good understanding of how The Pecking Order Theory evolved over time and why academics are still discussing this topic on a broad basis. By linking it to business related articles and hypotheses that are tested, the results delivered here are not biased in one direction.
Inhaltsverzeichnis (Table of Contents)
- Executive Summary
- Introduction
- Simple Example of Using the Pecking Order Theory
- Results from the Influential Literature Analysis
- The Pecking Order Theory in Corporate Finance Research
- The Use of the Pecking Order Theory in Business Decisions
- Testing the Pecking Order Theory
- Hypothesis and Empirical Results
- Concluding Remarks
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper investigates the Pecking Order Theory, analyzing its evolution through influential literature. It aims to evaluate the theory's explanatory power in corporate finance, considering both academic and practical applications. The paper tests hypotheses based on empirical findings and explores limitations of the theory in reflecting real-world business complexities.
- Evolution of the Pecking Order Theory
- Application of the Pecking Order Theory in business decisions
- Empirical testing of the Pecking Order Theory
- Limitations of the Pecking Order Theory
- Future research directions for understanding corporate capital structure
Zusammenfassung der Kapitel (Chapter Summaries)
Executive Summary: This section provides an overview of the paper's investigation into the Pecking Order Theory, highlighting its evolution, core research approaches, and empirical testing. It concludes that while the theory offers valuable insights, it's not a complete explanation of corporate finance decisions due to complexities and the limitations of solely relying on theoretical models.
Introduction: The chapter introduces the challenge companies face in financing projects, contrasting the Modigliani-Miller theorem with the realities of imperfect markets. It establishes the Pecking Order Theory and the Trade-Off Theory as key frameworks, positioning the paper's investigation within the broader context of influential literature analysis on the Pecking Order Theory. The chapter emphasizes the inherent limitations of relying solely on theoretical concepts to understand complex, dynamic business situations.
Simple Example of Using the Pecking Order Theory: This chapter presents a simplified numerical example illustrating how managers and investors interact according to the Pecking Order Theory. This example is foundational for valuing research hypotheses later in the paper and provides a practical perspective to complement the theoretical discussions.
Schlüsselwörter (Keywords)
Pecking Order Theory, Corporate Finance, Capital Structure, Asymmetric Information, Empirical Research, Financial Decisions, Investment Projects, Managerial Behavior, Dynamic Models.
Frequently Asked Questions: A Comprehensive Language Preview of the Pecking Order Theory
What is the main topic of this paper?
This paper investigates the Pecking Order Theory in corporate finance. It analyzes the theory's evolution, its application in business decisions, and its limitations in explaining real-world complexities.
What are the key themes explored in the paper?
The paper explores the evolution of the Pecking Order Theory, its practical application in business decision-making, empirical testing of the theory, its limitations, and potential future research directions regarding corporate capital structure.
What is the Pecking Order Theory?
The Pecking Order Theory is a framework used in corporate finance to explain how companies finance their projects. It contrasts with the Modigliani-Miller theorem by acknowledging the realities of imperfect markets and asymmetric information.
What are the objectives of this research?
The paper aims to evaluate the explanatory power of the Pecking Order Theory in corporate finance, considering both academic and practical applications. It also tests hypotheses based on empirical findings.
What does the paper cover in its chapters?
The paper includes an executive summary, an introduction, a simple example illustrating the theory, a review of influential literature, a discussion of the theory's use in business decisions, methods for testing the theory, a presentation of hypotheses and empirical results, and concluding remarks.
What kind of methodology is used in this paper?
The paper uses a combination of literature review, theoretical analysis, and empirical testing to evaluate the Pecking Order Theory. It includes a simplified numerical example to illustrate the theory's application.
What are the limitations of the Pecking Order Theory according to this paper?
The paper acknowledges that the Pecking Order Theory, while offering valuable insights, doesn't completely explain corporate finance decisions due to real-world complexities and the limitations of theoretical models.
What are the key words associated with this research?
Key words include: Pecking Order Theory, Corporate Finance, Capital Structure, Asymmetric Information, Empirical Research, Financial Decisions, Investment Projects, Managerial Behavior, and Dynamic Models.
Where can I find more information on the Pecking Order Theory?
This paper provides a comprehensive overview of the Pecking Order Theory, including its evolution, applications, and limitations. Further research can be conducted using the keywords provided.
What is the overall conclusion of the paper?
The paper concludes that the Pecking Order Theory offers valuable insights into corporate finance decisions, but it is not a complete explanation due to the complexities of real-world business situations and the limitations of relying solely on theoretical models.
- Quote paper
- B.Sc. Marsilius Graf von Ingelheim (Author), 2010, Influential Literature Analysis on the Pecking Order Theory: An Investigation, Munich, GRIN Verlag, https://www.grin.com/document/148555
