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Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firms

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  • de Haan, Leo
  • Hinloopen, Jeroen

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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  • de Haan, Leo & Hinloopen, Jeroen, 2003. "Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firms," Journal of Empirical Finance, Elsevier, vol. 10(5), pages 661-681, December.
  • Handle: RePEc:eee:empfin:v:10:y:2003:i:5:p:661-681
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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