*We thank an anonymous referee and participants in the 2007 European Financial Management (EFMA) annual meeting for valuable comments and suggestions.
Pecking Order Behavior in Emerging Markets*
Article first published online: 17 DEC 2009
© 2009 Blackwell Publishing Ltd
Journal of International Financial Management & Accounting
Volume 21, Issue 1, pages 1–31, Spring 2010
How to Cite
Seifert, B. and Gonenc, H. (2010), Pecking Order Behavior in Emerging Markets. Journal of International Financial Management & Accounting, 21: 1–31. doi: 10.1111/j.1467-646X.2009.01034.x
- Issue published online: 17 DEC 2009
- Article first published online: 17 DEC 2009
This paper examines the validity of the pecking order hypothesis in 23 emerging market countries. Emerging market countries would appear to be an ideal setting for the pecking order hypothesis to hold because of the presence of strong asymmetric information issues and agency costs. We observe, however, little support for the pecking order hypothesis as the primary financing theory for all emerging market firms. Firms in these countries finance their deficit mainly with equity, the opposite of what would be expected under this hypothesis. However, we do find support for the pecking order for firms in emerging market countries that suffer the most from either asymmetric information issues and/or agency costs. Our findings are consistent with the idea that the environment the firm operates in influences the financial decisions the firm makes.