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JOURNAL OF ACCOUNTING AND FINANCE
Firm Growth and Financial Choices in Pennsylvania Firms:
An Empirical Study about the Pecking Order Theory
Author(s): Enyang Guo, Gary Leinberger
Citation: Enyang Guo, Gary Leinberger, (2012) "Firm Growth and Financial Choices in Pennsylvania Firms:
An Empirical Study about the Pecking Order Theory," Journal of Accounting and Finance, Vol. 12, Iss. 4, pp. 123 - 142
Article Type: Research paper
Publisher: North American Business Press
Abstract:
The Wall Street Journal April 28, 2009 reported market concern about sticky leverage. During the credit crunch of 2008, corporate leverage rose at a faster rate than it did at the peak of the economic boom, even as firms worked hard to reduce borrowing. It proved a significant concern for firms where deleveraging should be the top priority. This problem begs the question of how firms make financing choices in the first place. This paper uses Myers’ Pecking Order Theory to examine 250 Pennsylvania companies during the period of 1988 – 2007. Our empirical results support Myers’ Pecking Order Theory. The study provides additional empirical support for the Pecking Order Theory while avoiding potential problems of varying state-level tax and regulatory environments.
