TY - JOUR
T1 - Testing the pecking order theory
T2 - the importance of methodology
AU - Vasiliou, Dimitrios
AU - Eriotis, Nikolaos
AU - Daskalakis, Nikolaos
PY - 2009/6/5
Y1 - 2009/6/5
N2 - Purpose: The purpose of this paper is to show that different methodologies may lead to different implications about the validity of the pecking order theory. Design/methodology/approach: Using data from Greek firms as a starting-point, the paper first investigates whether they follow the financing pattern implied by the pecking order theory and then illustrates that conclusions concerning the pecking order should be carefully shaped by researchers, as the methodology used can be misleading. Two different information sources are used; the first is data derived from the financial statements of the Greek firms listed in the Athens Exchange, while the second comprises the answers to a detailed questionnaire. Findings: It is shown that a negative relationship between leverage and profitability does not necessarily mean that the pecking order financing hierarchy holds. Analysis should not rely solely on the mean-oriented regression quantitative analysis to test the pecking order theory, as it refers to a distinct hierarchy. Research limitations/implications: Further research should focus on investigating the reasons that underlie actual firm financing. Practical implications: The fact that the pecking order is actually a hierarchy makes research in this field more complex. Analysts should consider this special feature of the pecking order approach when analyzing the existence of the pecking order financing pattern. The methodology followed is of crucial importance in the analysis of the existence of the pecking order financing pattern. Originality/value: To the authors' knowledge, this is the first paper to test the pecking order pattern of financing using simultaneously quantitative and qualitative data, and to compare results and conclusions drawn from these two different types of methodology.
AB - Purpose: The purpose of this paper is to show that different methodologies may lead to different implications about the validity of the pecking order theory. Design/methodology/approach: Using data from Greek firms as a starting-point, the paper first investigates whether they follow the financing pattern implied by the pecking order theory and then illustrates that conclusions concerning the pecking order should be carefully shaped by researchers, as the methodology used can be misleading. Two different information sources are used; the first is data derived from the financial statements of the Greek firms listed in the Athens Exchange, while the second comprises the answers to a detailed questionnaire. Findings: It is shown that a negative relationship between leverage and profitability does not necessarily mean that the pecking order financing hierarchy holds. Analysis should not rely solely on the mean-oriented regression quantitative analysis to test the pecking order theory, as it refers to a distinct hierarchy. Research limitations/implications: Further research should focus on investigating the reasons that underlie actual firm financing. Practical implications: The fact that the pecking order is actually a hierarchy makes research in this field more complex. Analysts should consider this special feature of the pecking order approach when analyzing the existence of the pecking order financing pattern. The methodology followed is of crucial importance in the analysis of the existence of the pecking order financing pattern. Originality/value: To the authors' knowledge, this is the first paper to test the pecking order pattern of financing using simultaneously quantitative and qualitative data, and to compare results and conclusions drawn from these two different types of methodology.
KW - Capital structure
KW - Financing
KW - Greece
KW - Research methods
UR - http://www.scopus.com/inward/record.url?scp=84984971136&partnerID=8YFLogxK
U2 - 10.1108/17554170910975900
DO - 10.1108/17554170910975900
M3 - Article
AN - SCOPUS:84984971136
SN - 1755-4179
VL - 1
SP - 85
EP - 96
JO - Qualitative Research in Financial Markets
JF - Qualitative Research in Financial Markets
IS - 2
ER -