Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2002-08-01
Number: 02-072/2
Author-Name: Leo de Haan
Author-Email: L.de.Haan@dnb.nl
Author-Workplace-Name: De Nederlandsche Bank
Author-Name: Jeroen Hinloopen
Author-Email: j.hinloopen@uva.nl
Author-Workplace-Name: University of Amsterdam, and Delft University of Technology
Title: Ordering the Preference Hierarchies for Internal Finance, Bank Loans, Bond and Share Issues
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.
Classification-JEL: G32; C25
Keywords: corporate finance; discrete choice models; ordered financing hierarchies
File-Url: https://papers.tinbergen.nl/02072.pdf
File-Format: application/pdf
File-Size: 231707 bytes
Handle: RePEc:tin:wpaper:20020072