The capital structure practices of listed firms in South Africa.
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Authors
Kasozi, Jason
Ngwenya, Sam
Issue Date
2010
Type
Article
Language
en
Keywords
Financial distress, Capital structure, Trade-off theory, Pecking-order theory
Alternative Title
Abstract
This study investigates whether financial theory is aligned with financial practice by testing two conventionally recognised theories of capital structure choice, the trade-off theory and the pecking-order theory against the financing practices of listed firms on the Johannesburg Stock Exchange (JSE) during the period 1995-2005. Data were obtained from the McGregor database. The results indicated a unique, but significantly positive, correlation between debt financing and financial distress, and a significant negative correlation between debt financing and the collateral value of assets. These findings suggest that financial theory is not aligned with practice on firms listed on the JSE. This study attempts to contribute to efforts to align financial theory with practice, and to help future researchers advance or modify current theories.
Description
Citation
Kasozi, J. and Ngwenya, S. 2010. The capital structure practices of listed firms in South Africa, Corporate Ownweship & Control, 8(1): 624-636.
Publisher
Virtus Interpress
License
Journal
Volume
Issue
PubMed ID
DOI
ISSN
1810-3056