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1990s is definitely going to be a critical period of time for
Taiwan''s high-tech industries which have long enjoyed much
attention and support from the government. However, the
government''s six-year plan and other sector of the economy have
demanded an increasing share of Taiwan''s usable fund. In
addition the liberation of Taiwan''s financial syatem has caused
interest rates and exchange rates to become more volatile.
Thus, financing the increasing investment project is becoming
difficult and complex. The well known MM theorem (Modigliani
and Miller 1958) shows that financing is irrevalent to
investment decision. the agency problem literature has
suggested that to maximize the value of a firm, it is desirable
for the firm to finance its operation with an optimal capital
structure that will minimize its weighted average cost of
capital. However several recent studies (e.g.,Myers and Majluf,
1984 and Breadley and Myers, find with survey data that, in
practice the financing behavior of the S&P 500 firms is best
described by the pecking order theory. This finding obviously
contradicts to the traditional views of financing behavior of
firms and deserves further investigation. This study conducted
a survey on SIPA''s finance managers. Based on the responded
questionaire, two competing theories of capital structure are
tested. The study found: (1) The financing behavior of Hsinchu
SIPA''s companies is in accord with the pecking order theory.
(2) The type of industries and companies scale have no impact
on the debt ratio. (3) The debt ratio of the sample companies
are significantly from their optimal debt ratios.
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