Abstract
We use the staggered introduction of a major financial-reporting regulation worldwide to study whether firms make financing decisions consistent with the pecking order theory. Exploiting cross-country and within country-year variation, we document that treated firms increase their issuance of external financing (and ultimately increase investment) after the new regime. Furthermore, firms make different leverage decisions (debt vs equity) around the new regulation depending on their ex-ante debt capacity, which allows them to adjust their capital structure. Our findings highlight the importance of the pecking order theory in explaining financing as well as investment policies.
| Original language | English |
|---|---|
| Pages (from-to) | 727-750 |
| Number of pages | 24 |
| Journal | Journal of Accounting, Auditing and Finance |
| Volume | 37 |
| Issue number | 4 |
| DOIs | |
| State | Published - Oct 2022 |
Bibliographical note
Publisher Copyright:© The Author(s) 2020.
Funding
The authors thank Linda Myers (editor), Mohan Venkatachalam (discussant), and two anonymous reviewers for their suggestions. Further, they thank Manuel Adelino, Joshua Anderson, Mark Bradshaw, John Core, Xavier Giroud, João Granja, Nick Guest, Michelle Hanlon, Amy Hutton, Christian Leuz, Gustavo Manso, Stewart Myers, Jeff Ng, Scott Richardson, Michael Roberts, Antoinette Schoar, Nemit Shroff, Eric So, Jerry Zimmerman, and workshop participants at the 2019 JAAF Conference, University of Arizona, Boston College, University of British Columbia, Catholic-Lisbon University, Harvard, INSEAD, LBS, MIT, Penn State, Rice University, UCLA, University of Sao Paulo, and Wharton for helpful comments. The authors gratefully acknowledge financial support from the MIT Sloan School of Management, Rice University, and UCLA. Patricia Naranjo and Daniel Saavedra are also grateful for financial support from the Deloitte Foundation.
| Funders | Funder number |
|---|---|
| Deloitte & Touche Foundation | |
| University of California, Los Angeles | |
| Rice University | |
| Sloan School of Management, Massachusetts Institute of Technology |
Keywords
- capital structure
- financial-reporting regulation
- financing decisions
- IAS
- IFRS
- information asymmetry
- international accounting
ASJC Scopus subject areas
- Accounting
- Finance
- Economics, Econometrics and Finance (miscellaneous)