Impact of capital structure on performance from a pecking order perspective: evidence from panel data of Brazilian publicly traded companies before and during the COVID-19 pandemic

Abstract

The present study aimed to evaluate the relationship of the capital structure versus the performance, from the perspective of the Pecking Order theory, of companies listed on B3, and to compare the results in the pre-pandemic and post-Covid-19 pandemic periods. The study was characterized as descriptive and quantitative. A regression was performed with panel data, a fixed and balanced model, for 187 B3 companies, whose consolidated and inflation-adjusted financial statements were available at Economática®. The quarterly data corresponded to the period from the 2nd quarter of 2018 to the 4th quarter of 2021. A dummy variable was included in the model to identify the pre-pandemic (2018 and 2019) and post-pandemic (2020 and 2021) periods. The results indicate that companies listed on B3 were negatively impacted in their value during the Covid-19 period, given that companies that increased the use of short-term third-party capital during the pandemic showed a decrease in the market value ratio divided by the Asset. The increase in leverage showed a negative relationship with their performance, as recommended by the Pecking Order theory. As a limitation of this study, the lack of use of other theories on Capital Structure to compare the results found is mentioned, thus suggesting, for future studies, the inclusion of other theories for analysis and also the realization of a deeper investigation on the effects of the problems of agency and information asymmetry that may have contributed to the results found.