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The Pecking Order Theory and the Firm's Life CycleLaarni T. BulanCornerstone Research Zhipeng YanNew Jersey Institute of Technology 2009 Banking and Finance Letters, Vol. 1, No. 3, 2009 Abstract: We examine the central prediction of the pecking order theory of financing among firms in two distinct life cycle stages, namely growth and maturity. We find that within a life cycle stage, where levels of debt capacity and external financing needs are more homogeneous, and after sufficiently controlling for debt capacity constraints, firms with high adverse selection costs follow the pecking order more closely, consistent with the theory.
Keywords: Life Cycle, Pecking Order, Financing JEL Classification: G32 Accepted Paper SeriesDate posted: February 25, 2010 ; Last revised: November 19, 2010Suggested Citation |
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