The Pecking Order , Debt Capacity , and Information Asymmetry

  title={The Pecking Order , Debt Capacity , and Information Asymmetry},
  author={Mark T. Leary and Michael R Roberts},
We quantify the empirical relevance of the pecking order hypothesis using a novel empirical model and testing strategy that addresses statistical power concerns with previous tests. While the classificatory ability of the pecking order varies significantly depending on whether one interprets the hypothesis in a strict or liberal (e.g., “modified” pecking order) manner, the pecking order is never able to accurately classify more than half of the observed financing decisions. However, when we… CONTINUE READING
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