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Ordering the Preference Hierarchies for Internal Finance, Bank Loans, Bond and Share Issues

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  • Leo de Haan

    ()
    (De Nederlandsche Bank)

  • Jeroen Hinloopen

    ()
    (University of Amsterdam, and Delft University of Technology)

Abstract

We estimate the incremental financing decision for a sample of some 150Dutch companies for the years 1984 through 1997, thereby distinguishinginternal finance and three types of external finance: bank borrowing, bondissues and share issues. First, we estimate a multinomial logit model whichconfirms several predictions of both the static trade-off theory and thepecking-order theory as to the determinants of financing choices. Next, weuse ordered probit models to determine which financing hierarchy fits thedata best. The results suggest that Dutch firms have a most-preferredfinancing hierarchy: (i) internal finance, (ii) bank loans, (iii) shareissues, (iv) bonds issues.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 02-072/2.

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Date of creation: 01 Aug 2002
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Handle: RePEc:dgr:uvatin:20020072

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Keywords: corporate finance; discrete choice models; ordered financing hierarchies;

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References

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Citations

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Cited by:
  1. Sau Lino, 2007. "New Pecking Order Financing for Innovative Firms: an Overview," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200702, University of Turin.
  2. R.T.A. de Haas & H.M.M. Peeters, 2004. "Firms' dynamic adjustment to target capital structures in transition economies," WO Research Memoranda (discontinued) 761, Netherlands Central Bank, Research Department.
  3. W. Allard Bruinshoofd & Clemens J. M. Kool, 2004. "Dutch corporate liquidity mangement: New evidence on aggregation," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 195-230, November.
  4. W. Allard Bruinshoofd & Clemens J. M. Kool, 2004. "Dutch Corporate Liquidity Management," DNB Staff Reports (discontinued) 124, Netherlands Central Bank.
  5. Sze Kim Chin & Nur Adiana Hiau Abdullah, 2013. "Announcements Effect of Corporate Bond Issuance and Its Determinants," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.
  6. Péter Hernádi & Mihály Ormos, 2012. "What managers think of capital structure and how they act: Evidence from Central and Eastern Europe," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(2), pages 47-71, December.
  7. L. de Haan & J. Hinloopen, 1999. "Debt or equity? An empirical study of security issues by Dutch companies," WO Research Memoranda (discontinued) 577, Netherlands Central Bank, Research Department.
  8. Djaoudath Alidou, 2012. "Employees Equity Issue and Asymmetric Information:Evidence from France - Augmentations de capital réservées aux salariés et Asymétrie d’information:Cas de la France," Working Papers CREGO 1120901, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  9. Tijs de Bie & Leo de Haan, 2004. "Does market timing drive capital structures? A panel data study for Dutch firms," DNB Working Papers 016, Netherlands Central Bank, Research Department.
  10. Viet Anh Dang, 2005. "Testing the Trade-off and Pecking Order Theory: Some UK Evidence," Money Macro and Finance (MMF) Research Group Conference 2005 28, Money Macro and Finance Research Group.
  11. A. Heughebaert & T. Vanacker & S. Manigart, 2012. "Institutional Frameworks, Venture Capital and the Financing of European New Technology-Based Firms," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/809, Ghent University, Faculty of Economics and Business Administration.
  12. Degryse, Hans & de Jong, Abe, 2006. "Investment and internal finance: Asymmetric information or managerial discretion?," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 125-147, January.
  13. Kabir, Rezaul, 2003. "Corporate Financing in The Netherlands: Some Empirical Evidence," EIFC - Technology and Finance Working Papers 32, United Nations University, Institute for New Technologies.
  14. Kinga Mazur, 2007. "The Determinants of Capital Structure Choice: Evidence from Polish Companies," International Advances in Economic Research, Springer, vol. 13(4), pages 495-514, November.
  15. Ralph de Haas & Marga Peeters, 2004. "The Dynamic Adjustment towards Target capital Structures of Firms in," DNB Staff Reports (discontinued) 123, Netherlands Central Bank.
  16. repec:onb:oenbwp:y::i:90:b:1 is not listed on IDEAS
  17. Ramzi Drissi & Tarek Ghazouani & Assaad Ghazouani, 2013. "Financial Decision of Tunisian Firms in the Context of Market Timing Theory," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 923 - 931.
  18. Meuleman, Miguel & De Maeseneire, Wouter, 2012. "Do R&D subsidies affect SMEs’ access to external financing?," Research Policy, Elsevier, vol. 41(3), pages 580-591.

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