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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

    (ICI - Laboratoire Information, Coordination, Incitations - UEB - Université européenne de Bretagne - European University of Brittany - UBO - Université de Brest - Télécom Bretagne - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest)

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.

Suggested Citation

  • Gharsalli Mazen, 2011. "French firm's financing choices: towards a reconciliation of the static trade-off theory and the pecking order theory?," Post-Print hal-00603762, HAL.
    • Handle: RePEc:hal:journl:hal-00603762
    Note: View the original document on HAL open archive server: https://hal.science/hal-00603762
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    References listed on IDEAS

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    Keywords

    capital structure; trade-off theory; pecking order theory;
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