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We test the assumptions of trade-off theory (TOT) and pecking order theory (POT) regarding corporate leverage. The dependent variable being the debt ratio, we apply a linear model upon a balanced panel data-set of 2,370 French SMEs over the period 2002 - 2010. In accordance to TOT, trade credit...
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Most of the research about capital structure is focused towards two theories: trade off theory (TOT) and pecking order theory (POT). The idea is to explore which theory works better in certain conditions and identify the key determinants that affect the capital structure of the company. However,...
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This study suggests the preponderance of the pecking order theory over the trade-off theory when there are greater problems of information asymmetry, which is more usual in small-sized firms. The results show that debt level has an inverse relationship with non-debt tax shield and direct...
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