Capital Structure And Its Impact On The Market Value Of Stocks Within The Framework Of The Theory Of Pecking Order And Market Timing

(Analytical Study Of A Sample Of Industrial Companies Listed In The Iraq Stock Exchange For The Period 2006-2020)

Dissertation Submitted To

To The Council Of The College Of Management And Economics-University Of Karbala It Is Part Of The Requirements Of The Ph.D. Philosophy Of As Science In Business Administration

By

Muhammad Kamel Ghanem

Supervised by

Prof. Dr. Abdel-Hussein Jassem Al-Asadi

Abstract

     The current study aims to test the effect of the capital structure within the framework of the Pecking Order theory with its dimensions (retained earnings ratio – debt ratio – common stock ratio) and the capital structure within the framework of the market timing theory with its dimensions (company size – liquidity – tangible assets – market value to book value – weighted rate for external financing, the ratio of market value to book value) in the market value of shares.

And that is based on the data and financial statements published in the Iraq Stock Exchange for the Iraqi industrial companies, which numbered (21) companies that represented the total of the study community, and (10) companies were selected from them on the basis of the availability of the required evidence during the study period (2006-2020) and these companies The selected representative of the study sample.

The problem of the study was the intellectual debate about the optimal method for the capital structure formula and the most effective method in the comparison between internal and external financing for Iraqi industrial companies and identifying funding sources that are commensurate with the Iraqi financial, economic and political environment and its reflection on the market value of the shares of these companies. The questions through which the study hypotheses were formulated to achieve its objective.

The researcher used the method of simple linear regression and multiple linear regression to test the effect of the two independent variables (head structure within the framework of capture theory and capital structure within the framework of market timing theory) on the dependent variable (market value of shares) using the statistical program (SPSS V.25).

The study reached a set of conclusions, the most important of which was (through the results of the statistical analysis, the study concluded that the Iraqi industrial companies are closer to using the philosophy of Pecking Order  theory than the theory of market timing in building the capital structure, despite the continuation of issuing ordinary shares in most cases instead of resorting to Debt as a second financing option after retained earnings) The study also reached a set of conclusions, the most important of which was (the importance of issuing legal legislation that allows Iraqi companies to  repurchase their shares from the financial market in a way that helps these companies from market timing to preserve the value of the company’s shares in the market in the event of exposure to decrease below its book value).

Keywords: Capital Structure- Capture Theory- Market Timing Theory- Market Value Of Shares