Target gearing in the UK: A triangulated approach

Jon Tucker, John Pointon, Moji Olugbode

Research output: Contribution to journalArticle

1 Citation (Scopus)
2 Downloads (Pure)

Abstract

Purpose: The purpose of this study is to investigate the incidence of target gearing behaviour in firms as well as the drivers of such behaviour. Design/methodology/approach: The paper employs a triangulation approach across three methodological phases: a questionnaire survey, logistic regression modelling of firm data, and interviews with finance directors. The results are then discussed under the key themes of gearing optimality, valuation issues, external drivers, the finance life-cycle, the impact of risk, and the relationship between gearing and corporate strategy. Findings: The results reveal that the majority of firms engage in targeting, though targets are subject to fairly frequent revision as both external and internal drivers evolve. Important external drivers include macroeconomic variables and analysts' views, whereas important internal drivers include income gearing and profitability. Practical implications: Given the range and variety of drivers, target gearing evidently represents a complex strategic decision for finance directors. The paper provides a benchmark perspective for finance directors when determining their firm's gearing strategy. Originality/value: The innovation of the paper is the study of target gearing across three methods, the results of which are then triangulated to provide a deeper understanding of both the quantifiable and qualitative drivers of gearing. This provides a far broader insight into the real-world determination of gearing strategy than a conventional empirical approach.

Original languageEnglish
Pages (from-to)58-80
Number of pages23
JournalInternational Journal of Managerial Finance
Volume6
Issue number1
DOIs
Publication statusPublished - 19 Feb 2010
Externally publishedYes

Fingerprint

Finance
Logistic regression
Optimality
Design methodology
Modeling
Analysts
Innovation
Macroeconomic variables
Strategic decisions
Triangulation
Life cycle
Income
Profitability
Benchmark
Corporate strategy
Targeting
Questionnaire survey

Bibliographical note

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

Keywords

  • Capital input
  • Financial control
  • Gearing
  • United Kingdom

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance

Cite this

Target gearing in the UK : A triangulated approach. / Tucker, Jon; Pointon, John; Olugbode, Moji.

In: International Journal of Managerial Finance, Vol. 6, No. 1, 19.02.2010, p. 58-80.

Research output: Contribution to journalArticle

Tucker, Jon ; Pointon, John ; Olugbode, Moji. / Target gearing in the UK : A triangulated approach. In: International Journal of Managerial Finance. 2010 ; Vol. 6, No. 1. pp. 58-80.
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