A Test Of The Pecking Order Theory: An Empirical Study Of Institutional And Insider Ownership Identities On The Swedish Market

Abstract: The paper investigates the financing behavior of firms listed on the Stockholm Stock Exchange (SSE) main markets using the pecking order theory. The study also examines the influence of institutional and insider ownership identities on the financing decisions of the firms. Examining a sample of 107 firms from 2009-2017, we found the pecking order theory of corporate financing consistent with firms listed on the SSE main market. It was observed that tax shield has positive influence on firms' leverage. However, we found no significant evidence of the influence of both institutional and insider ownership identities in this study. This observed relationship raises the question of whether institutional owners optimally perform the disciplinary and monitoring roles.