Ordering the Preference Hierarchies for Internal Finance, Bank Loans, Bond and Share Issues

Leo de Haan and Jeroen Hinloopen

No 02-072/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We estimate the incremental financing decision for a sample of some 150Dutch companies for the years 1984 through 1997, thereby distinguishinginternal finance and three types of external finance: bank borrowing, bondissues and share issues. First, we estimate a multinomial logit model whichconfirms several predictions of both the static trade-off theory and thepecking-order theory as to the determinants of financing choices. Next, weuse ordered probit models to determine which financing hierarchy fits thedata best. The results suggest that Dutch firms have a most-preferredfinancing hierarchy: (i) internal finance, (ii) bank loans, (iii) shareissues, (iv) bonds issues.

Keywords: corporate finance; discrete choice models; ordered financing hierarchies (search for similar items in EconPapers)
JEL-codes: C25 G32 (search for similar items in EconPapers)
Date: 2002-08-01
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Citations: View citations in EconPapers (1)

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Journal Article: Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firms (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20020072

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