This research is based on pecking order theory, which is one of the major\ncapital structure determinant theory, driven by the information asymmetry.\nThe purpose of this research is to investigate whether the pecking order\ntheory provides an accurate description of companies financing choices in the\ncontext. Further, to examine whether informational asymmetry plays an important\nrole in determining the financing hierarchy, and whether the financial\ndeficit variable plays a key role determining the capital structure, the\nanalysis has been conducted by utilizing a unique dataset from the Sri Lankan\nlisted companies within multiple industrial sectors from 2011 to 2017. Empirical\nanalysis has been done based on Panel data analysis model with regression\ntools suggested. The findings suggest that companyâ??s follow original\npecking order hypothesis where companiesâ?? preference towards debt is higher\nthan equity in determining their capital structure. Moreover, financing choices\nare contingent on informational asymmetry. Moreover, the financial deficit\nvariable has a significant impact compared to four more conventional capital\nstructure determinants.
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