Pecking-order view

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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 ?
Mind you, when it comes to the ultimate pecking order, it is the hen bird that rules the roost.
Frank and Goyal's (2003) results did not support the pecking order theory being the correct explanation of the capital structure of the US firms, but in large companies, some signs did exist that supported pecking order theory.
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.
He doesn't come very often but when he does all the other birds truly know what the pecking order is.
In explaining firms' financing behavior, the pecking order theory has become a widely debated model of capital structure choice.
But Yapp had fallen behind regional team-mate Gethin Jenkins and Duncan Jones in the pecking order for the Wales number one jersey.
As Taylor acquaints us with the pecking order in his school, his parents' conversations and escalating arguments, his struggle with his stammer, his hero worship of his older cousin, the prejudice and ignorance of his adult acquaintances, his first crush and first serious ethical dilemma, every word rings true.
Rubber plantations have a variety of agricultural options they can substitute, and petroleum derived synthetic rubbers can be pushed further down in the pecking order when supplies get tight.
Thnis is also the story of the Reformatory and how it has changed over the years as the men discuss how they've changed, formed deep friendships, the prison "pecking order", and so much more that is a part of prison life.