TITLE:
Does the Pecking Order Theory Apply to Chinese Publicly Traded Companies? Evidence from Manufacturing Sector
AUTHORS:
Yue Yuan
KEYWORDS:
Chinese Manufacturing, Pecking Order Theory, Market
JOURNAL NAME:
Modern Economy,
Vol.9 No.12,
December
25,
2018
ABSTRACT: The pecking order theory is one of the most crucial theories in corporate finance
field. Empirical test on this theory is very common
in western countries while domestic empirical study is still relatively limited
in China. The majority of previous studies mainly concentrate in the whole capital
market. Over the last decade, manufacturing sector
experienced incrementally
rapid development in China. The manufacturing sector not only makes critical contributions to China’s economy and society development, but also becomes key force in supporting the world economy. Thus,
this article tests pecking order theory on Chinese publicly traded firms in manufacturing sector. Using
a panel of 1212 observations during the period between 2013 and 2015, we draw
the conclusion that there is no evidence to back up the pecking order theory. Further subsample analysis
indicates that pecking order does not apply to Chinese manufacturing listed
firms with both high float shares ratio and low float shares ratio.