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Debt or equity? An empirical study of security issues by Dutch companies

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  • L. de Haan
  • J. Hinloopen

Abstract

We consider empirically the incremental financing decisions for a sample of 153 AEX-quoted companies during the years 1984 through 1997. First, we estimate a binomial logit model for the choice between internal and external finance. Second, we estimate a multinomial logit model for the choice between three types of external finance: private loans, bonds and shares. The results provide evidence for the pecking order theory. The issuance behaviour appears not to be consistent with long-term capital structure targets.

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File URL: http://www.dnb.nl/binaries/wo0577_tcm46-145906.pdf
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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 577.

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Date of creation: 1999
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Handle: RePEc:dnb:wormem:577

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Keywords: Corporate finance; discrete choice models;

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References

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  1. Leo de Haan & Jeroen Hinloopen, 2002. "Ordering the Preference Hierarchies for Internal Finance, Bank Loans, Bond and Share Issues," Tinbergen Institute Discussion Papers 02-072/2, Tinbergen Institute.
  2. Hovakimian, Armen & Opler, Tim & Titman, Sheridan, 2001. "The Debt-Equity Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 1-24, March.
  3. Haan, L. de & Koedijk, C.G. & Vrijer, E.J. de, 1994. "Buffer stock money and pecking order financing: Results from an interview study among Dutch firms," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3108622, Tilburg University.
  4. MacKie-Mason, Jeffrey K, 1990. " Do Taxes Affect Corporate Financing Decisions?," Journal of Finance, American Finance Association, American Finance Association, vol. 45(5), pages 1471-93, December.
  5. Jong, A. de & Veld, C.H., 1998. "An Empirical Analysis of Incremental Capital Structure Decisions Under Managerial Entrenchment," Discussion Paper, Tilburg University, Center for Economic Research 1998-83, Tilburg University, Center for Economic Research.
  6. Helwege, Jean & Liang, Nellie, 1996. "Is there a pecking order? Evidence from a panel of IPO firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 40(3), pages 429-458, March.
  7. Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, American Finance Association, vol. 44(1), pages 19-40, March.
  8. Krishnaswami, Sudha & Spindt, Paul A. & Subramaniam, Venkat, 1999. "Information asymmetry, monitoring, and the placement structure of corporate debt," Journal of Financial Economics, Elsevier, Elsevier, vol. 51(3), pages 407-434, March.
  9. DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, Elsevier, vol. 8(1), pages 3-29, March.
  10. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  11. Masulis, Ronald W. & Korwar, Ashok N., 1986. "Seasoned equity offerings : An empirical investigation," Journal of Financial Economics, Elsevier, Elsevier, vol. 15(1-2), pages 91-118.
  12. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  13. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  14. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, American Finance Association, vol. 32(2), pages 371-87, May.
  15. Lucas, Deborah J & McDonald, Robert L, 1990. " Equity Issues and Stock Price Dynamics," Journal of Finance, American Finance Association, American Finance Association, vol. 45(4), pages 1019-43, September.
  16. Chirinko, Robert S. & Singha, Anuja R., 2000. "Testing static tradeoff against pecking order models of capital structure: a critical comment," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(3), pages 417-425, December.
  17. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 147-175, November.
  18. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, Elsevier, vol. 13(2), pages 187-221, June.
  19. Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, American Finance Association, vol. 50(2), pages 609-31, June.
  20. Esho, Neil & Lam, Yung & Sharpe, Ian G., 2001. "Choice of Financing Source in International Debt Markets," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 10(3-4), pages 276-305, July.
  21. Maria Elena Bontempi, 2002. "The dynamic specification of the modified pecking order theory: Its relevance to Italy," Empirical Economics, Springer, Springer, vol. 27(1), pages 1-22.
  22. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  23. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  24. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, American Finance Association, vol. 46(1), pages 297-355, March.
  25. Marsh, Paul, 1982. " The Choice between Equity and Debt: An Empirical Study," Journal of Finance, American Finance Association, American Finance Association, vol. 37(1), pages 121-44, March.
  26. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, American Finance Association, vol. 39(3), pages 575-92, July.
  27. Shyam-Sunder, Lakshmi & C. Myers, Stewart, 1999. "Testing static tradeoff against pecking order models of capital structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 51(2), pages 219-244, February.
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