The Pecking Order Theory and the Firm's Life Cycle

Banking and Finance Letters, Vol. 1, No. 3, 2009

Posted: 25 Feb 2010 Last revised: 19 Nov 2010

See all articles by Laarni T. Bulan

Laarni T. Bulan

Cornerstone Research

Zhipeng Yan

New Jersey Institute of Technology

Date Written: 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

Suggested Citation

Bulan, Laarni Tobia and Yan, Zhipeng, The Pecking Order Theory and the Firm's Life Cycle (2009). Banking and Finance Letters, Vol. 1, No. 3, 2009, Available at SSRN: https://ssrn.com/abstract=1559150

Laarni Tobia Bulan (Contact Author)

Cornerstone Research ( email )

Boston, MA
United States

Zhipeng Yan

New Jersey Institute of Technology ( email )

United States

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