JOURNAL OF ACCOUNTING AND FINANCE
Corporate Financing Decisions: Integrated Analyses of Trade-Off, Pecking
Order, and Market Timing Influences
Author(s): Joseph P. Ogden, Shanhong Wu
Citation: Joseph P. Ogden, Shanhong Wu, (2012) "Corporate Financing Decisions: Integrated Analyses of Trade-Off, Pecking Order, and Market Timing Influences," Journal of Accounting and Finance, Vol. 12, Iss. 5, pp. 34 - 58
Article Type: Research paper
Publisher: North American Business Press
We develop and test a model that integrates the trade-off theory, pecking order model, and market timing hypothesis about firms' financing decisions. The model expands the basic pecking order regression model by nesting variables associated with the trade-off theory and market timing hypothesis, allowing the coefficient to vary with these variables. Empirical results support the trade-off theory and market timing hypothesis, as the pecking order coefficient varies significantly with optimal leverage determinants and timing variables. Our overall analysis leads us to suggest that firm characteristics largely determine a firm’s overall financing orientation, encompassing both leverage and security of choice in incremental financing.