Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firmsJournal of Empirical Finance (2003)
We estimate the incremental financing decision for a sample of some 150 Dutch companies for the years 1984 through 1997, thereby distinguishing internal finance and three types of external finance: bank borrowing, bond issues, and share issues. First, we estimate a multinomial logit model, which confirms several predictions of both the static trade-off theory and the pecking order theory as to the determinants of financing choices. Next, we estimate all possible ordered probit models to determine which financing hierarchy fits the data best. The results suggest that Dutch firms have a unique most preferred financing hierarchy: (i) internal finance, (ii) bank loans, (iii) share issues, and (iv) bond issues.
- corporate finance,
- discrete choice models
Publication DateDecember, 2003
Citation InformationJeroen Hinloopen and Leo de Haan. "Preference hierarchies for internal finance, bank loans, bond, and share issues: evidence for Dutch firms" Journal of Empirical Finance Vol. 10 Iss. 5 (2003) p. 661 - 681 ISSN: 0927-5398
Available at: http://works.bepress.com/hinloopen/22/