This study examines the impact of tax avoidance practices on investment efficiency in Egypt, with particular emphasis on the moderating role of earnings management by exploring whether these tactics reflect managerial opportunism or serve as a mechanism to ease financial constraints. We employ panel data regression to analyze a sample of 58 non-financial firms listed on the Egyptian Exchange (EGX) over the period 2017–2024, yielding 464 firm-year observations. Data are collected from official corporate websites, EGX, and Egypt for Information Dissemination (EGID). Grounded in agency theory, signaling theory, and pecking order theory, this study reveals how conflicts of interest and information asymmetry between managers and stakeholders lead to managerial opportunism. The findings show that tax avoidance undermines the investment efficiency in the Egyptian market. Earnings manipulation further intensified this effect due to the financial statements’ opacity. A closer examination reveals that earnings management exacerbates overinvestment by masking managerial decisions. Conversely, for financially constrained firms with a tendency to underinvest, tax avoidance and earnings management may contribute to improved efficiency by generating internal liquidity and alleviating external financing constraints. These results provide valuable insights for regulators, highlighting that policy should be directed against managerial opportunism and improving transparency, instead of focusing solely on curbing tax avoidance. From an investor perspective, they should closely monitor and understand the tax-planning strategies to ensure they enhance the firm’s value.

Economic policy uncertainty arising from fiscal, monetary, and regulatory fluctuations poses significant challenges to corporate financial decision-making. Financial managers are therefore required to maintain business stability and sustainability amid dynamic and unpredictable conditions. This study examined financial management strategies adopted by companies in response to economic policy uncertainty and analyzed their theoretical and practical implications. Using a descriptive qualitative approach through a literature review, data were collected from scientific journals, academic books, and reports published by international financial institutions. The findings reveal that companies tend to implement conservative and flexible strategies, including increasing cash reserves, reducing leverage, diversifying business and operational activities, and utilizing financial derivatives for risk mitigation. Firms also tend to delay large-scale investments and rely more heavily on internal financing. These responses reflect corporate efforts to cope with heightened policy risk and support the relevance of trade-off theory, pecking order theory, and signaling theory in corporate financial decision-making under uncertainty. Overall, adaptive and risk-anticipative financial management strategies have become crucial for enhancing corporate resilience and flexibility. This study contributes both conceptually and practically to the development of stronger corporate financial policies in the face of global and domestic economic uncertainty

ABSTRACT This paper investigates how UK firms finance new investment and whether their choices follow a financing hierarchy consistent with leading theories of capital structure. Using a survey of 2886 firms conducted by the UK Department for Business and Trade and the Bank of England (2020–2023), we examine six financing sources: retained earnings, owner's capital, trade credit, bank loans, non‐bank debt, and outside equity. Our findings show that retained earnings dominate investment financing, followed by injections of capital from owners, while bank and non‐bank debt are secondary sources and outside equity remains marginal. Econometric analysis reveals that retained earnings substitute for all other sources, whereas owner's capital is complementary to both bank and non‐bank debt. Financing patterns vary systematically by firm size, age, and investment type. Overall, the results provide strong support for the pecking order theory, with additional insights from life‐cycle theory, and highlight the importance of policy in shaping SME access to finance during periods of economic disruption.

Start-up and growing businesses require adequate financial resources to survive and achieve sustainable growth. Empirical evidence indicates that a significant proportion of business failures result from inadequate financing alongside operational and managerial challenges. This study investigates the effectiveness of capital structure on the growth and start-up of businesses, focusing specifically on the roles of equity capital, debt capital, and retained earnings. A desk review methodology was adopted, synthesizing relevant theoretical and empirical literature. The study draws on the Pecking Order Theory, which emphasizes the superior impact of internal financing on financial performance, favoring equity and retained earnings over debt. The Modigliani–Miller Capital Structure Theory provides a conceptual benchmark, though its relevance is limited to perfect market conditions. Agency Theory highlights the influence of corporate governance and managerial decision-making on capital structure choices, while Trade-off Theory underscores the cost-effectiveness of equity and retained earnings relative to debt. Empirical evidence indicates that equity financing significantly enhances financial performance, and retained earnings support firm growth when effectively reinvested. In contrast, debt financing generally has an insignificant or negative impact on start-up and growing businesses. The study concludes that low-cost, internally generated financing is most effective in promoting sustainable growth and recommends that start-up businesses prioritize equity mobilization through personal savings and family contributions while strategically limiting external borrowing and reinvesting retained earnings. Keywords: Capital Structure, Business Start-up and Growth, Pecking Order Theory, Modigliani–Miller Capital Structure Theory, Agency Theory, Trade-off Theory, Empirical Review.

This study explores how capital structure decisions at PT ABC, a property developer managing both an apartment project and an office building were shaped, implemented, and subsequently tested when market conditions shifted unexpectedly. Adopting a qualitative approach, the research draws on in-depth interviews with key managerial personnel as well as an examination of financing agreements, project cash-flow reports, and internal planning documents. The findings reveal that PT ABC’s initial financing decisions were anchored in optimistic expectations regarding presales and rental income, with minimal consideration of downside scenarios or market volatility. As apartment sales slowed and office occupancy weakened, the company’s cash flow deteriorated, leading to breaches of critical loan covenants, including the DSCR requirement. These breaches triggered delays in loan disbursements and further constrained project progress. In response, management initiated several adaptive measures such as renegotiating loan terms, offering substantial price discounts to accelerate cash inflows, and implementing cost-cutting efforts. These actions reflect a strong reliance on internal financing consistent with the Pecking Order Theory, although they proved insufficient to fully counter the pressures created by the weakening market. Overall, the study underscores the importance of more conservative capital structure planning, rigorous cash-flow stress testing, and early-warning systems for covenant risks in navigating the cyclical and highly sensitive dynamics of the property sector.

Objective: The primary objective of this study was to examine the extent to which project financing strategies affect the performance of water supply projects in the Nyanza Region of Kenya. Theoretical Framework: The study was guided by five core theories: Pecking Order Theory (Myers & Majluf, 1984), which explains financing preferences; Water Supply Reliability Theory (Uri & Shamir, 1981), emphasizing infrastructure reliability; Risk Management Theory (Brealey, Myers & Allen, 2020), focusing on proactive mitigation of risks; Theory of Water Policy (Osinski, 2022), which outlines the impact of governance and regulatory frameworks; and Contingency Theory (Fiedler, 1964), highlighting the need for context-specific strategies. Methodology: A mixed methods research design was employed, combining quantitative analysis from 457 project stakeholders using structured questionnaires and qualitative data from key informant interviews. Pearson correlation and linear regression were used to analyze the quantitative data, while thematic analysis supported the qualitative findings. Results and Discussion: Project financing strategies were found to significantly influence water project performance (R=0.512, p<0.05), with regression analysis confirming a strong positive effect (β=0.424, t=12.726, p=0.000). Donor grants emerged as a key enabler of project success. The findings affirm the theoretical frameworks and underscore the role of financing in infrastructure outcomes. Research Implications: The study recommends the development of robust policy frameworks by national and county governments to encourage sustainable financing options. Practically, implementers should align financing with structured risk mitigation and stakeholder engagement for better project outcomes Originality/Value: This study uniquely combines multiple theoretical lenses to explain how financing strategies, risk management, and policy mechanisms collectively influence water supply project performance in a resource-constrained and governance-sensitive context.

The aviation industry encompasses a variety of stakeholders. In recent years, the growing reliance of airlines on leased aircraft has elevated leasing companies to a critical position within the sector. Despite their importance, the capital structure of leasing companies remains an underexplored area in the aviation literature. This study is a pioneering effort to investigate both the theoretical and empirical aspects of leasing companies’ capital structure. Using panel data analysis, the research examines the capital structure behavior of these companies over the period from 2013 to 2023. Six different models are developed to provide a more in-depth analysis of the effects of short-term and long-term financing decisions on the capital structure. The findings generally indicate that the financing behavior of leasing companies is in line with the pecking order theory, which suggests seeking internal financing before seeking external debt or equity.

ABSTRACT We examine the impact of environmental, social, and governance (ESG) performance on corporate short‐term financing structure, with particular focus on trade credit and bank loans. Using 28,785 firm‐year observations from all A‐Share listed companies in China between 2009 and 2020, we find that superior ESG performance reduces financing costs. Based on the pecking order theory, we find that such companies tend to rely more on trade credit, highlighting a substitution effect between trade credit and bank loans. This substitution effect is more pronounced for companies that face higher financing constraints, possess stronger competitive advantages, are relatively smaller in size, and operate in regions subject to stringent environmental regulations. A further examination of bank loans reveals that trade credit mainly substitutes for short‐term loans, with no significant effect on long‐term loans. Additionally, such companies benefit from bank loans at lower cost. The results remain robust after addressing concerns related to alternative measurements of key variables, endogeneity problems, and special samples. Overall, this research advances our understanding of ESG performance as a determinant of financing structure helps policymakers establish a holistic framework to improve corporate ESG performance.

Abstract Our analysis focuses on understanding the financing behaviour of Italian firms during a period marked by a significant economic crisis and the resulting deleveraging process. The objective is to identify the determinants of Italian firms’ leverage decisions during this deleveraging phase and to assess whether their financing behaviour is more consistent with the predictions of the Pecking Order Theory (PO) or the Trade-Off Theory (TO). We consider the main determinants identified in the literature when selecting the independent variables, to control for factors that may simultaneously influence leverage. The analysis is based on a large longitudinal micro-dataset provided by the Italian National Statistical Institute, covering the years 2008–2015, and employs a Generalized Method of Moments (GMM) approach. The GMM estimations were performed both on the full sample and on various subpopulations. The results suggest that explaining the financing behaviour of Italian firms solely through one of these two theoretical frameworks would not be realistic.

This study investigates the effect of profitability, asset growth, and firm size on firm value, with capital structure as a mediating variable in Indonesian manufacturing companies. The research aims to determine whether internal financial characteristics influence firm value directly or indirectly through capital structure decisions. Using a quantitative, causal-comparative approach, data were collected from 30 basic and chemical manufacturing firms listed on the Indonesia Stock Exchange during 2021–2024. Multiple linear regression and Sobel tests were applied to analyze causal relationships among variables. The results reveal that profitability positively and significantly affects capital structure, whereas asset growth and firm size do not show significant effects. However, profitability, asset growth, and firm size do not significantly influence firm value either directly or through capital structure. The Sobel test further indicates that capital structure does not mediate the relationship between profitability and firm value. These findings suggest that firm value in the Indonesian manufacturing sector is more influenced by factors outside the tested model. The study supports the pecking order theory, highlighting that profitable firms tend to rely on internal funding rather than external debt to sustain firm value.

A traditional capital structure is one of financial conservatism and minimizes debt capitalization in favor of equity and retained earnings. And this protects the business from economic distress by lessening burden of its fixed-interest claims and minimizing bankruptcy risks, in turn ensuring its durability and continuity. Such practices are particularly important during uncertain economic climates, where highly leveraged companies are more exposed to the liquidity risks of market fluctuations. Despite a broad literature on the effect of leverage on firm value, we know surprisingly little about how conservative capital structure policy affects firm outcomes through strategic choices. Decisions about how to scale back one’s financial conservatism in pursuit of investment opportunities, risk, and growth become ineluctably influenced by financial strategy, but there is little empirical research exploring strategy as a mechanism in the relationship between financial conservatism and firm performance. In this regard, it is the intention of this study to provide a conceptual framework that associates conservative capital structures with financial stability, with strategic decision-making being the mediating process by which they are related. As a theoretical background, the research is based on insights of the trade-off theory, pecking order theory, and agency theory. By integrating these finance theories with principles of strategic management, the paper offers a full picture of how prudent financing options shape long-run organizational adaptability. Operationally, the most important consequence of this framework is to emphasize the fine balance between stability and growth. While conservative financing protects from insolvency and assurance of the investors, it can limit the rate of expansion and development if the companies become too risk averting. This dichotomy underscores a paradox that must be resolved how much financial safety is too much, and how little is too little. Finally, it provides helpful implications for corporate managers, policymakers, and investors in making trade-offs in capital structures that can result in both toughness and sustainable growth.

Abstract This paper tests the empirical power of the trade-off and pecking order theories in explaining the financial behaviour of companies in bank-oriented financial systems. These theories, developed and tested mainly in market-oriented, highly developed countries, are evaluated for their relevance in different environments. In this study, panel data analysis was performed on 16,881 companies from Bosnia and Herzegovina, Croatia, Macedonia, Serbia, and Slovenia over the period 2009–2016, using the Shyam-Sunder and Myers (1999) methodology. The findings suggest that the pecking order theory partly explains the financial policies of companies in EU countries (Croatia and Slovenia), while companies in non-EU countries (Bosnia and Herzegovina, Macedonia, Serbia) exhibit target-adjustment behaviour. Subsample analysis reveals that unquoted and medium-sized firms tend to follow the pecking order in financing, whereas quoted and large firms focus on maintaining target leverage levels. However, the results show that neither the coefficients nor the R 2 values align with theoretical predictions or comparable empirical studies, particularly those on U.S. companies. This raises doubts about the applicability of classical capital structure theories to firms in varying contexts, highlighting the need for further research into additional influencing factors.

Revisiting the pecking order theory: insights from an emerging market economy

This study investigates the effect of capital structure on the performance of 289 non-financial firms listed on ‎the Bombay Stock Exchange (BSE) from 2018 to 2023. Capital structure, defined as the mix of debt and ‎equity, significantly influences firm value. Unlike earlier studies focusing mainly on ROA or ROE, this ‎research includes net profit and gross profit margins. Using the two-step Generalized Method of Moments ‎‎(GMM) to address endogeneity, the study incorporates Modigliani and Miller’s theory, agency theory, and ‎the pecking order theory. Results show a negative relationship between long-term debt and firm ‎performance. Firm size positively impacts efficiency, while a higher dividend payout negatively correlates ‎with ROE. Sales growth enhances firm performance, and asset tangibility negatively affects efficiency. The ‎study is limited by its regional scope and five-year period, suggesting future research should include more ‎countries and extended timeframes for broader insights‎.

Purpose This study aims to examine the impact of liquidity on the capital structure of firms listed on the Dubai financial market (DFM). This study analyzes the influence of liquidity ratios, specifically the current ratio (CR) and quick ratio (QR), on leverage metrics over a 13-year period using a random-effects generalized least squares (GLS) regression analysis. Regression analysis was conducted using STATA version 12. Design/methodology/approach A panel dataset of 20 United Arab Emirates (UAE)-listed firms across multiple sectors was analyzed over a 13-year period. Financial ratios were computed from company financial statements. The study employed random-effects GLS regression using STATA to investigate the relationship between liquidity and leverage, including short-term and long-term debt ratios. Findings The results show that the CR is significantly and negatively associated with the debt/equity ratio and long-term debt levels. The QR, while also negatively correlated with leverage, showed statistically insignificant effects. Liquidity has limited influence on short-term liabilities. These findings support the pecking order theory and suggest that DFM-listed firms prioritize liquidity preservation and financial flexibility over aggressive leverage. Research limitations/implications This study focuses solely on firms listed on the DFM, limiting the generalizability of findings to other regions or exchanges within the UAE. It does not account for macroeconomic variables, industry-level differences or corporate governance factors that may influence capital structure decisions. The use of only quantitative data excludes managerial perspectives and qualitative insights. Future research should incorporate sectoral segmentation, expand the geographic scope and include variables such as interest rates, inflation and ownership structure to offer a more comprehensive understanding of liquidity-capital structure dynamics in emerging markets. Practical implications The findings offer valuable guidance for corporate finance managers in emerging markets, particularly in the UAE. Firms with higher liquidity levels are shown to prefer lower leverage, especially in long-term debt, highlighting the importance of maintaining strong liquidity buffers to enhance financial flexibility. Policymakers and regulators may use these insights to design frameworks that promote sustainable capital structures. Investors can also assess firms' liquidity positions as an indicator of conservative debt management strategies, especially in volatile market environments. The study reinforces the need for liquidity-based risk assessment in corporate financing decisions. Social implications By highlighting the role of liquidity in capital structure decisions, this study indirectly supports broader financial stability within emerging markets. Firms that maintain prudent liquidity management are less likely to experience financial distress, which can reduce the risk of layoffs, creditor losses and systemic shocks. For the UAE, fostering financially resilient companies contributes to national economic diversification goals and long-term sustainability. Improved capital structure decisions also enhance trust among investors, lenders and other stakeholders, promoting responsible corporate behavior and aligning with regional visions for economic growth and social development. Originality/value This paper contributes to the limited empirical literature on liquidity and capital structure in Middle Eastern markets. By focusing on the UAE, it highlights region-specific financial strategies and provides actionable insights for policymakers, investors and corporate managers operating in emerging economies.

This study was conducted to investigate the impact of profitability and solvency on dividend policy in non-cyclical consumer sector companies listed on the Indonesia Stock Exchange (IDX) from 2021 to 2024. This sector was chosen because of its important role in the national economy, particularly given its relatively stable characteristics in the face of global economic dynamics, as seen in the production of staple goods. The independent variables in this study are profitability, proxied by Return on Assets (ROA), and solvency, proxied by the Debt to Asset Ratio (DAR). The dependent variable is dividend policy, measured by the Dividend Payout Ratio (DPR). The research method used is a quantitative approach with a causal associative design. The study population includes all non-cyclical consumer companies listed on the IDX, while the sample was obtained through a purposive sampling method with certain criteria. The data used are secondary data sourced from the companies' annual financial reports. Data analysis was performed using multiple linear regression with the help of SPSS version 27 software, and tested with the classical assumption test, partial test (t-test), simultaneous test (F-test), and coefficient of determination. The research results show that profitability has no significant effect on dividend policy. Similarly, solvency has no significant effect on dividend policy. Simultaneous testing also showed that both variables together had no significant effect on dividend policy. This finding indicates that dividend distribution decisions are more influenced by other factors, such as investment needs, cash flow, and internal company policies. Theoretically, this study supports the concept of residual dividend policy and pecking order theory, which emphasize the importance of using profits to fund investments and maintain financial stability before distributing dividends. Therefore, it can be concluded that profitability and solvency are not dominant factors in determining dividend policy in the non-cyclical consumer sector.

Purpose This study examines how professional African footballers finance their international careers and proposes an equitable model for distributing earnings among contributors, using the pecking order theory (POT) as a guiding framework. It seeks to determine whether players’ financing behaviour follows a pecking order and how earnings can be fairly shared among stakeholders to reduce conflict. Design/methodology/approach Employing a mixed-methods design, the study draws on in-depth interviews with 36 African footballers from across the CAF zones who have played in over 30 professional leagues in UEFA countries. Primary qualitative data is supported by secondary sources, including player profiles, media reports, club websites and academic publications. Findings The findings reveal that financing players’ careers in Africa follows a pecking order. Footballers initially rely on cheap internal financing sources (family and personal efforts) before turning to external, debt-like and equity-based support (community sponsors, local managers and agents) to pursue professional opportunities abroad. The study proposes a tripartite model for earnings distribution, allocating proportional returns to family, debt contributors and equity stakeholders, based on timing, risk and level of support. This addresses the financing gap and offers a practical solution to disputes over financial entitlements. Originality/value This research is among the first to systematically apply POT to athlete financing in Africa and propose a model that reflects the informal yet critical roles played by non-institutional actors. By drawing parallels with startup financing, it contributes new theoretical and policy insights into sports migration, career development and conflict resolution in football. It also sets an agenda for further research into athlete financing in other sports and developing regions.

Small and medium-sized enterprises (SMEs) are widely recognized as the backbone of African economies, yet they face persistent financing constraints that limit growth and competitiveness. Understanding how these firms prioritize financing sources is therefore central to both academic debates and policy interventions. This paper investigates the relevance of the Pecking Order Theory (POT) in explaining financing decisions of African SMEs, focusing on whether firms follow the hierarchical order of using internal funds first, then debt, and finally external equity when facing financing needs. Drawing on firm-level data from recent World Bank Enterprise Surveys and complementary national datasets, we test the applicability of POT using the financing-deficit approach proposed by Shyam-Sunder and Myers (1999) and dynamic panel models to account for heterogeneity across countries, firm age, and sector. The results show partial support for POT. Consistent with theory, African SMEs demonstrate a strong preference for internal financing, followed by debt when internal resources are insufficient. However, deviations emerge in contexts of high credit constraints, weak collateral systems, and underdeveloped financial reporting practices, where some firms rely directly on external equity, grants, or owner injections. Regulatory quality and country-level institutional environments further moderate the hierarchy of financing, with firms in more transparent and stable settings adhering more closely to POT predictions. This study contributes to the literature by providing cross-country African evidence on SME capital structure, highlighting how institutional frictions and firm-specific factors shape financing behavior. The findings have practical implications: for managers, sequencing financing in line with POT can reduce costs of capital and dependence on external equity; for policymakers, strengthening credit information systems, collateral registries, and SME accounting frameworks could improve debt access and reinforce efficient financing hierarchies. Overall, the paper underlines that while POT remains a useful benchmark, African SMEs’ financing decisions are shaped by both firm-level opacity and broader institutional constraints. These insights expand the theoretical and practical understanding of capital structure in emerging economies and inform policies aimed at bridging the SME financing gap.

Abstract: The objective of the study was to establish the effect of equity financing on financial efficacy of listed manufacturing companies in Kenya listed in Nairobi securities exchange over a period of seven (7) years (2011 – 2017). The study was based on Modigliani and Miller Proposition I and II, the trade-off theory, pecking order theory and the agency theory. The research adopted a descriptive research design. The target population for the study were staff members of the listed manufacturing firms in Kenya. The target constituted respondents from, accounting department, finance department, Auditing and Assurance Department and Monitoring and Evaluation Department of listed manufacturing firms in Nairobi securities exchange in Kenya. A sample of 106 respondents were selected by use of stratified random sampling. Data was collected through a structured questionnaire. Both descriptive and inferential statistics were used to analyze the data. Data presentation was done by the use of charts and tables for ease of understanding and interpretation. Pilot study was conducted by the researcher taking some questionnaires to the listed manufacturing firms head offices in Kenya. The study used Cronbach (Alpha – α) model to test the internal consistency with the alpha coefficient of above 0.7 being considered reliable. To establish the validity of the research instrument the research pursued the opinions of experts in the survey of study especially the researcher’s supervisors. Quantitative and qualitative data that were collected using questionnaires and the questionnaires were inspected for errors and gaps before issuing to the respondents. The findings revealed that equity financing positively and significantly influenced financial efficacy among the listed manufacturing firms.

ABSTRACTFinancial development has the capacity to assimilate economic, environmental, and political shocks to the maximum extent. Building on this strength, the present study investigates how Financial Sector Development (FSD) influences Environmental Protection Investment (EPIRR), while also accounting for the moderating role of Climate Policy Uncertainty (CPUI), using firm‐level data from Chinese A‐share listed companies spanning 2010 to 2022. To ensure robust and reliable findings, the study employs multiple methodological approaches. The findings show a strong positive relationship between FSD and EPIRR. It indicates that a stable and developed financial system improves credit access, lowers funding costs, and increases firms' ability to invest in environmental projects. It also encourages green products like sustainability‐linked loans and improves long‐term planning through stronger investor confidence. However, when CPUI is included as a moderating factor, the positive relationship weakens, which unveils that an uncertainty about future environmental rules makes firms and financial institutions cautious. As a result, they often delay or reduce their green investments due to unpredictable regulations, unclear enforcement, and uncertain returns on long‐term sustainability efforts. This study adds to theory by using the Resource‐Based View and Strategic Choice Theory to explain how FSD serves as a strategic resource and decision‐making driver for corporate green investment. Empirically, it advances the sustainability finance literature by employing rigorous econometric techniques and robustness checks, while also incorporating alternative measures of FSD, as well as heterogeneity analysis, channel exploration, and the entropy balancing approach. Practically, it underscores the role of a well‐developed financial sector in reducing financing barriers for green projects while highlighting the need for stable climate policies to foster long‐term sustainability investments. This study reconceptualized the traditional Pecking Order Theory by demonstrating that in a well‐developed financial system, firms prefer external funds over internal ones due to lower costs and reduced information gaps.