Pecking order theory: A comparative test and insight analysis on its occurrence in the Philippine and Indonesian listed non-financial firms for the period 2005-2009

• Main Authors: Chua, Jenny, Ouyang, Yarong, Shi, Jia Jia, Xu, Xiaoni
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Finance > Philippines; Debt > Philippines; Equity > Philippines; Finance > Indonesia; Debt > Indonesia; Equity > Indonesia; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/18520
• Institution: De La Salle University

Pecking order theory states that there is a hierarchy in the financing choice of a firm, that being, internal financing, debt, then equity. This study regress cash dividends, cash used in investing activities, change in working capital, and net operating cash flow against change in noncurrent liabilities. The study aims to measure and compare the degree of occurrence of Pecking order theory between Philippines and Indonesia and give insights regarding the rationality or irrationality of listed firms financing behavior. Results show that Indonesian listed firms follow the Pecking order theory more closely than the Philippines. The financial sector is the best model that measures Pecking order theory in the Philippines, whereas in Indonesia it is the mining sector. Data utilized are from publicly listed non-financial firms in both Philippines and Indonesia. Specific financial data is mainly sourced from OSIRIS database, dated 2005 to 2009.