Pecking-order view

(redirected from pecking order)
Also found in: Dictionary, Thesaurus, Medical, Idioms, Encyclopedia, Wikipedia.

Pecking-order view (of capital structure)

The argument that external financing transactions costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, followed by new debt, and debt-equity hybrids. Finally, new equity is at the least preferred source.

Pecking-Order View

A theory stating that, all other things being equal, companies seeking to finance a new project or product have a hierarchy of preferred financing options that progresses from the most preferred to the least preferred. The hierarchy is said to follow this order: internal funding (or simply financing a project or product out-of-pocket), debt issuance, debt-equity hybrid issuance, and equity issuance. The pecking-order view states that the hierarchy is structured this way because of the transaction costs involved in each form of financing. That is, internal funding has a lower transaction cost that debt issuance, and so forth.
References in periodicals archive ?
Contrary to the trade-off theory, the pecking order theory predicts a negative relationship between profitability and leverage because a profitable firm will have more retained earnings over a period of time.
Doyle is also down the pecking order internationally but travelled to Bulgaria for the recent World Cup qualifier owing to a lack of cover for Shay Given.
RECORD caps holder Malcolm O'Kelly has been told he has not dropped to fourth in the pecking order for a place in Ireland's second row.
Stack is well down the pecking order at Highbury and Reading boss Steve Coppell has always intended to seal a permanent deal.
TO all the fans that think we're bidding too low for Morientes, I would like to point out that he comes behind Michael Owen in the pecking order atReal Madrid.
But Shipperley has missed the club's opening four Premiership matches with a knee injury and fell further down the pecking order with the arrival of Sandor Torghelle, Ivan Kaviedes and Nicola Ventola.
The Trinidad and Tobago international is fifth-choice striker at City following the arrival of Dwight Yorke and is also behind Emile Heskey, Mikael Forssell and Clinton Morrison in the pecking order.
Even if they were missed by the USCs, Cal State Northridges and Pepperdines in the Division I pecking order.
Male lobsters swaggering around tanks may preserve their pecking order by remembering who has already trounced them.
The rate of progress demonstrated by the Chinese producers and their potential threat to the current pecking order in worldwide handset market share should not be underestimated, particularly for the lower to upper-middle tiers of the market.
He said: "If you could measure confidence, I'd be last down the pecking order.
Blackwell said: "Liam was down the pecking order at Manchester United.