The Pecking Order and Financing Decisions: Evidence From Changes to Financial-Reporting Regulation

Patricia Naranjo; Daniel Saavedra; Rodrigo S. Verdi

doi:10.1177/0148558X20945066

The Pecking Order and Financing Decisions: Evidence From Changes to Financial-Reporting Regulation

Patricia Naranjo
, Daniel Saavedra
, Rodrigo S. Verdi

Accountancy

Producción científica: Article › revisión exhaustiva

14 Citas (Scopus)

Resumen

We use the staggered introduction of a major financial-reporting regulation worldwide to study whether firms make financing decisions consistent with the pecking order theory. Exploiting cross-country and within country-year variation, we document that treated firms increase their issuance of external financing (and ultimately increase investment) after the new regime. Furthermore, firms make different leverage decisions (debt vs equity) around the new regulation depending on their ex-ante debt capacity, which allows them to adjust their capital structure. Our findings highlight the importance of the pecking order theory in explaining financing as well as investment policies.

Idioma original	English
Páginas (desde-hasta)	727-750
Número de páginas	24
Publicación	Journal of Accounting, Auditing and Finance
Volumen	37
N.º	4
DOI	https://doi.org/10.1177/0148558X20945066
Estado	Published - oct 2022

Nota bibliográfica

Publisher Copyright:
© The Author(s) 2020.

Financiación

The authors thank Linda Myers (editor), Mohan Venkatachalam (discussant), and two anonymous reviewers for their suggestions. Further, they thank Manuel Adelino, Joshua Anderson, Mark Bradshaw, John Core, Xavier Giroud, João Granja, Nick Guest, Michelle Hanlon, Amy Hutton, Christian Leuz, Gustavo Manso, Stewart Myers, Jeff Ng, Scott Richardson, Michael Roberts, Antoinette Schoar, Nemit Shroff, Eric So, Jerry Zimmerman, and workshop participants at the 2019 JAAF Conference, University of Arizona, Boston College, University of British Columbia, Catholic-Lisbon University, Harvard, INSEAD, LBS, MIT, Penn State, Rice University, UCLA, University of Sao Paulo, and Wharton for helpful comments. The authors gratefully acknowledge financial support from the MIT Sloan School of Management, Rice University, and UCLA. Patricia Naranjo and Daniel Saavedra are also grateful for financial support from the Deloitte Foundation.

Financiadores
Deloitte & Touche Foundation
University of California, Los Angeles
Rice University
Sloan School of Management, Massachusetts Institute of Technology

ASJC Scopus subject areas

Accounting
Finance
Economics, Econometrics and Finance (miscellaneous)

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The Pecking Order and Financing Decisions: Evidence From Changes to Financial-Reporting Regulation

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ASJC Scopus subject areas

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