Corporate financing decisions: UK survey evidence

Vivien Beattie, Alan Goodacre*, Sarah Jane Thomson

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

91 Citations (Scopus)


Despite theoretical developments in recent years, our understanding of corporate capital structure remains incomplete. Prior empirical research has been dominated by archival regression studies which are limited in their ability to fully reflect the diversity found in practice. The present paper reports on a comprehensive survey of corporate financing decision-making in UK listed companies. A key finding is that firms are heterogeneous in their capital structure policies. About half of the firms seek to maintain a target debt level, consistent with trade-off theory, but 60% claim to follow a financing hierarchy, consistent with pecking order theory. These two theories are not viewed by respondents as either mutually exclusive or exhaustive. Many of the theoretical determinants of debt levels are widely accepted by respondents, in particular the importance of interest tax shield, financial distress, agency costs and also, at least implicitly, information asymmetry. Results also indicate that cross-country institutional differences have a significant, impact on financial decisions.

Original languageEnglish
Pages (from-to)1402-1434
Number of pages33
JournalJournal of Business Finance and Accounting
Issue number9-10
Publication statusPublished - Nov 2006


  • Agency theory
  • Capital structure
  • Institutional differences
  • Pecking order theory
  • Survey
  • Trade-off theory


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