Numerous empirical studies have consistently highlighted a significant inverse correlation between a firm’s profitability and its choice of capital structure, aligning with the pecking-order theory, primarily attributed to information asymmetry dynamics. Cooney & Kalay (1993) extended this theory with the concept of a generalized pecking order, elucidating a shift in the theory’s relevance when information asymmetry is influenced more by uncertainties related to growth rather than asset composition. This study employs the two-phase company cycle framework introduced by (Dickinson, 2011), distinguishing between the introductory and maturity phases, which are known to exhibit distinct patterns of information asymmetry. Through empirical analysis, we evaluate the applicability of the pecking-order theory in explaining the interplay between profitability and capital structure, incorporating the notion of a generalized pecking order. Our research findings underscore that the pecking-order theory holds limited relevance during the introductory phase but gains significance during the maturity phase, particularly in elucidating the relationship between profitability and capital structure. During the introductory phase, we observed a positive association between profitability and debt issuance, while profitability exhibited a negative association with equity issuance.
