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 ?
Many empirical studies have supported the pecking order theory primarily based on the negative profitability-leverage relationship.
Instead, the model is typically estimated over both surpluses and deficits and imposes a common homogeneous pecking order coefficient.
With Harris, Neil Jenkins and Stephen Jones suddenly ahead of him in the pecking order for Wales, something snapped inside Henson.
He hasn't appeared in the first team this season and looks to have fallen behind Nico Vaesen in the pecking order.
By stressing the pecking order over larger socio-economic forces, Conley takes a fairly ahistorical slice of the larger reality.
Demand for finance is expected to follow a pecking order of internal equity, debt, external equity (Myers, 1984) but it is frequently observed that a large number of small firms are averse to using external equity (Berger and Udell, 1998; Binks, 1991; Hughes, 1997; Hughes and Storey, 1994).
In one essay, the two argue there is a racial pecking order among whites, Native and African Americans at Florida State University in Tallahassee (the school's sports teams are called the Seminoles).
And high on the pecking order when the credits roll at the end is the film's production editor, Harry Linden.
Twelve other hands regularly appear in his manuscripts, indicating how manuscripts were transcribed in Feathery's scriptorium, and even Feathery's place in the pecking order.
He envisioned social classes defined by taste and ideas rather than by an elitist pecking order.
For instance, he explains the new pecking order thus: "To calculate a person's status, you take his net worth and multiply it by his antimaterialistic attitudes.