Does Pakistani Insurance Industry follow Pecking Order Theory?

Abstract

Current study examines the Pecking Order Theory of capital structure by using firm level characteristics of insurance companies of Pakistan over five years from 2007 to 2011. The results of regression analysis indicate that size, profitability, tangibility, risk and liquidity are important determinants of capital structure of insurance companies of Pakistan. In addition, the results also indicate that profitable, more liquid, more tangible and risky insurance companies follow Pecking Order Hypothesis.

Keywords: Pecking Order Theory, Insurance Companies, Pakistan