Testing Financial Hierarchy Based on A PDQ-CRE Model
Yue Zhao and
Additional contact information
Zongwu Cai: Department of Economics, The University of Kansas, Lawrence, KS 66045, USA
Meng Shi: Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing, Beijing 100190, and School of Mathematical Sciences, University of Chinese Academy of Sciences, Beijing, Beijing 100049, China
Yue Zhao: School of Business, Renmin University of China, Beijing, Beijing 100872, China
Wuqing Wu: School of Business, Renmin University of China, Beijing, Beijing 100872, China
No 202011, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics
This paper investigates the relative importance of internal and external sources of funds in financing activities across different levels of investment activities by proposing a panel data quantile regression model with correlated random effects (PDQ-CRE), which accounts for heteroscedasticity in both firm-specific individuals and distribution of investment. A new estimation method is proposed by using the quasi-likelihood function for conditional quantile model and Laplace approximation. We show that the proposed estimator is consistent and normally distributed. A Monte Carlo simulation is conducted to examine the performance of the estimator in finite samples. Finally, empirical results find a strong evidence that the financing hierarchy of U.S. firms is in accordance with the first rung of the pecking order theory across all levels of investments from 10% to 90%.
Keywords: Correlated Random Effects; Panel Data; Pecking Order Theory; Quantile Regression Model; Quasi-Maximum Likelihood Estimator (search for similar items in EconPapers)
JEL-codes: C31 C33 (search for similar items in EconPapers)
Date: 2020-07, Revised 2020-07
New Economics Papers: this item is included in nep-ecm, nep-ore and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: 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:kan:wpaper:202011
Access Statistics for this paper
More papers in WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Professor Zongwu Cai ().