French Firm’s Financing Choices: Towards a Reconciliation of the Static Trade-Off Theory and the Pecking Order Theory?

Gharsalli Mazen

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.

Full Text: PDF DOI: 10.5430/ijfr.v3n1p57

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This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Financial Research
ISSN 1923-4023(Print) ISSN 1923-4031(Online)

 

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