Small and Medium Size Enterprise Financing: A Note on Some of the Empirical Implications of a Pecking Order
Robert Watson and
Journal of Business Finance & Accounting, 2002, vol. 29, issue 3‐4, 557-578
Asymmetric information models predict a ‘pecking order’ which reflects a combination of owner‐manager preferences and external capital supply constraints whenever insiders know more about the true value of the firm's prospects than outsiders. The pecking order results in retained earnings being the most preferred source of finance, then debt and finally the issue of new shares to outsiders. Using a sample of 629 UK SMEs over the five‐year period from 1990 to 1995 we find evidence consistent with a pecking order in which retained equity is preferred over debt. As expected, the evidence of a pecking order was particularly strong in respect of the closely‐held firms in our sample.
References: Add references at CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:29:y:2002:i:3-4:p:557-578
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X
Access Statistics for this article
Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker
More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().