ABSTRACT
Additionally, there is little dividend pressure from shareholders, so the re-financing of listed firms usually prioritizes additional or rights shares over debt. According to the pecking-order pattern of financing observed in advanced country corporations, firms obtain capital by making greater use of internal finance followed by debt and turning to stock market finance only as a last resort. Jensen’s (1986) free cash flow theory suggests that debt can mitigate the agency problems between shareholders and managers of firms and motivate management to act in the interests of the shareholders. How would their financing patterns differ from those of advanced country firms? What is the best strategy for refinancing?
