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French Firm¡¯s Financing Choices: Towards a Reconciliation of the Static Trade-Off Theory and the Pecking Order Theory?

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  • Gharsalli Mazen

Abstract

The main purpose of this study is to examine the validity of the static trade-off theory and the pecking order theory using a French panel data. Our empirical tests provide that we can not formally reject either of the two theories explaining financing behavior. However, they confirm the importance of considerations provided by the static trade-off theory. On the contrary, when we combine the adjustment model and the pecking order model we find that the statistical power of the hierarchical model is improved and the choice of financing of French firms confirms the greatest explanatory power of the pecking order hypotheses.

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  • Gharsalli Mazen, 2012. "French Firm¡¯s Financing Choices: Towards a Reconciliation of the Static Trade-Off Theory and the Pecking Order Theory?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(1), pages 57-72, January.
    • Handle: RePEc:jfr:ijfr11:v:3:y:2012:i:1:p:57-72
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    References listed on IDEAS

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