The Pecking Order Theory: Evidence from Listed Firms in Nigeria

Felix Babatunde Dada, Ben Ukaegbu


Pecking order theory of capital structure demonstrates how managers could reduce inefficiency in the presence of information asymmetry in the source of finance. This study aims at a critical evaluation of the relevance of pecking order theory to firms, using the panel data of the listed firms on the Nigerian Stock Exchange. The study adopt the fixed effect model for the determination of the target capital structure and the decision is based on the result of the Hausman test. The study applies the Vector error correction model to establish causality between the variables. The outcome indicates that the capital structure of Nigerian firms is positively related to asset structure while it is negatively related to profitability and liquidity. The study also shows that there is a causal relationship ranging from profitability and liquidity to the capital structure.

Full Text:




  • There are currently no refbacks.

To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.

Copyright © Macrothink Institute ISSN 2374-2089