Abstract

MONDRAGON-HERNANDEZ, Sonia Alexandra. Capital Structure of the Colombian Automobile Sector: An Application of Preference Hierarchies Theory. Cuad. Contab. [online]. 2013, vol.14, n.34, pp.219-243. ISSN 0123-1472.

Preference hierarchies theory states that there is no such thing as an optimal capital structure in businesses, but an order of priorities is established at the time of selecting the financial sources of the investment projects. On this basis, the present paper studies one methodology for the application of the theory with the purpose of evaluating its validity in a sample of businesses of the automobile sector in Colombia. This process implies the analysis of the relation between variations in debt and cash flow deficits in the businesses. For that purpose, a simple regression including both terms will be carried out, in order to evaluate the explanatory power of deficit on the emission or payment of debt. Based on this financial analysis it will be concluded that this group of businesses did not in fact seek an optimal capital structure in the studied period. Nevertheless, the application of the statistical model reveals that the businesses do not have a marked preference between financing with own resources and financial indebtedness as proposed in the theory.

Keywords : Capital Structure; Financial Structure; Financial Analysis; Automobile Sector; Economic structure; financial analysis.

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