Pecking Order Model of Corporate Financing: Review of Literature

15 Pages Posted: 17 Jan 2020

See all articles by Zaur Abdullazade

Zaur Abdullazade

University of Missouri at Columbia, Department of Economics

Date Written: December 2, 2019

Abstract

This paper reviews the literature on a firm’s capital structure that is driven by asymmetric information. One of the most popular models of firm’s financing decisions under an asymmetry in the literature is the pecking order theory (POT) of Myers (1984). It is based on the argument that firms have preference ranking over sources of funds for financing based on the corresponding information asymmetry costs (Myers et al. 1984, p.15). In recent studies, many interesting discussions have been generated about the POT. These studies attempt to detect the extent to which the POT describes the financing choices of firms. The results of relevant studies about the POT are presented here, in this literature review.

Keywords: Capital Structure, Pecking Order Theory

JEL Classification: C23, G32

Suggested Citation

Abdullazade, Zaur, Pecking Order Model of Corporate Financing: Review of Literature (December 2, 2019). Available at SSRN: https://ssrn.com/abstract=3506239 or http://dx.doi.org/10.2139/ssrn.3506239

Zaur Abdullazade (Contact Author)

University of Missouri at Columbia, Department of Economics ( email )

MO
United States
MO 65211 (Fax)

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