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Pecking Order Behavior in Emerging Markets *
Author(s) -
Seifert Bruce,
Gonenc Halit
Publication year - 2009
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/j.1467-646x.2009.01034.x
Subject(s) - pecking order , pecking order theory , emerging markets , order (exchange) , equity (law) , agency cost , economics , agency (philosophy) , principal–agent problem , information asymmetry , monetary economics , business , financial economics , microeconomics , finance , debt , capital structure , corporate governance , philosophy , epistemology , evolutionary biology , political science , biology , law , shareholder
Abstract This paper examines the validity of the pecking order hypothesis in 23 emerging market countries. Emerging market countries would appear to be an ideal setting for the pecking order hypothesis to hold because of the presence of strong asymmetric information issues and agency costs. We observe, however, little support for the pecking order hypothesis as the primary financing theory for all emerging market firms. Firms in these countries finance their deficit mainly with equity, the opposite of what would be expected under this hypothesis. However, we do find support for the pecking order for firms in emerging market countries that suffer the most from either asymmetric information issues and/or agency costs. Our findings are consistent with the idea that the environment the firm operates in influences the financial decisions the firm makes.