The influence of growth opportunities on the determinants of financing decisions : Evidence from Thai listed firms


  • Thanida Chitnomrath Dhurakij Pundit University


The Pecking Order Theory, Firm Characteristics, Financing Decisions, Growth Opportunities


This study tests whether the determinants of financing decisions vary with the influence of growth opportunities. It is hypothesized that firms with different growth opportunities may have different financing decisions determinants. The study first investigates the determinants of financing decisions according to the pecking order theory’s predictions and finds that six firm characteristics including firm size, liquidity, financial risk, fixed assets, profitability, and dividend policy are the significant determinants of financing decisions in the sample of 220 Thai listed firms during the period 2005-2007. The results show that Thai listed firms in the sample make financing decisions following the conceptual framework of the pecking order theory. Then, the sample is partitioned into positive- and negative-growth firms by the growth rate of earnings after tax to examine the determinants of financing decisions in each sub-sample. The results from analysis show that there are some differences as to the determinants of financing decisions in the two types of firms. The results for positive-growth firms are in line with the results of the whole sample while the results for negative-growth firms are different. Two firm characteristics - profitability and dividend policy are not included in the significant financing decisions determinants of negative-growth firms, only firm size, liquidity, financial risk, and fixed assets are the significant determinants of financing decisions for negative-growth firms. This discovery supports hypotheses of the study, indicating that the determinants of financing decisions in positive-growth firms are stronger than those of negative-growth firms. Thus, managers of Thai listed firms should take this into account when implementing financing strategies.


Download data is not yet available.


Akhtar, S. (2005). “The determinants of capital structure for Australian multinational and domestic corporations”. Australian Journal of Management, 30,2. pp.321-341.
Bennett, M. and Donnelly, R. (1993). The determinants of capital structure: some UK evidence”. British Accounting Review, 25, 1. pp.43-59.
Bevan, A. and Danbolt, J. (2002). “Capital structure and its determinants in the United Kingdom - A decompositional analysis”. Applied Financial Economics, 12 ,3. pp.159-170.
Booth, L., Aivazian, V., and Demirguc-Kunt, A. and Maksimovic, V. (2001). ”Capital structure in developing countries”. Journal of Finance, 56.pp.87-130.
Brealey, R. A., Myers, S. C. and Marcus, A. J. (2005). Fundamentals of Corporate Finance (4th ed.). Boston: McGraw Hill Irwin.
Cassar, G. and Holmes, S. (2003). “Capital structure and financing of SMEs: Australian evidence”, Accounting and Finance, 43, 2. pp.123-147.
Coakes, S. J. (2005). SPSS Version 12 .0 for windows Analysis without Anguish. Perth, WA: John Wiley & sons Australia.
Coleman, S. and Cohn, R. (1999). Small firms’ use of financial leverage:evidence from the 199 3 national survey of small business finances. Working paper. Hartford, Connecticut: University of Hartford.
Delcoure, N. (2007). “The determinants of capital structure in transitional economies”. International review of Economics and Finance, 16.pp.400-415.
Donaldson, G. (1961). Corporate debt capacity: A study of Corporate debt policy and the determinants of Corporate debt capacity. Research paper. Boston: Graduate School of Business Administration, Harvard University.
Eldomiaty, I. (2007). “Determinants of corporate capital structure: evidence from an emerging economy”. International Journal of Commerce & Management, 17, 1/2. pp.25-43.
Eriotis, N. (2007). “How firm characteristics affect capital structure: an empirical study”. Managerial Finance, 33, 5. pp.321-331.
Field, A. (2005). Discovering Statistics Using SPSS (2nd ed.). London: Sage.
Frank, M. and Goyal, V. (2003). “Testing the pecking order theory of capital structure”. Journal of Financial Economics, 67. pp.217-48.
Frank, M. and Goyal, V. (2004). Capital structure decisions: Which factors are reliably important?. EFA 2004 Maastricht Meetings Paper no.2464. Tuck Contemporary Corporate Finance Issues III.
Gaud, P., Jani, E., Hoesli, M. and Bender, A. (2005). “The capital structure of Swiss firms: An empirical analysis using dynamic panel data”. European Financial Management, 11 . pp.51-69.
Green, S. B. (1991). “How many subjects does it take to do a regression analysis?”. Multivariate Behavioral Research, 26. pp.499-510.
Harris, M. and Raviv, A. (1990). “Capital structure and the informational role of debt”. Journal of Finance, 45, 2. pp.321-349.
Harris, M. and Raviv, A. (1991). “The theory of capital structure”. Journal of Finance, 46, 1. pp.297-355.
Mazur, K. (2007). The determinants of capital structure choice: evidence from Polish companies. Working Paper. Gdansk: Gdansk Institute for Market Economics.
Michaelas, N., Chittenden, F. and Poutziouris, P. (1999). “Financial policy and capital Structure choice in U.K. SMEs: empirical evidence from company panel data”. Small Business Economics, 12 . pp.113-130.
Mishra, C. S. and McConaughy, D. L. (1999). “Founding family control and capital structure: The risk of loss of control and the aversion to debt”. Entrepreneurship Theory and practice, 23, 4. pp.53-64.
Myers, S. C. (1984). “The capital structure puzzle”. Journal of Finance, 34, 3. pp.575-592.
Myers, S. C. (2003). “Financing of corporations”. In G. Constantinides, M. Harris and R. Stulz (eds.). Handbook of the economics of finance (1A, pp.215-253). Amsterdam: elsevier.
Myers, S. C. and Majluf, N.S. (1984). “Corporate financing and investment decisions when firms have information that investors do not have”. Journal of Financial Economics, 13. pp.187-221.
Rajan, G. and Zingales, L. (1995). “What do we know about capital structure: some evidence from international data”. Journal of Finance, 50, 5. pp.1421-1460.
Ross, S. A., Westerfield, R. W. and Jaffe, J.F. (2004). Corporate Finance (7th ed.). Boston: McGraw Hill Irwin.




How to Cite

Chitnomrath, T. (2020). The influence of growth opportunities on the determinants of financing decisions : Evidence from Thai listed firms. Suthiparithat, 23(70), 23–44. Retrieved from



Research Articles