Pecking Order Theory in Finance
Donaldson observed that firms prefer first to finance investment with retained earnings, then, when they need outside funding, they prefer to issue severe debt instead of equity. It suggests that capital structures are determined largely by the history of needs for external finance. Pecking-order theory explains negative intra-industry correlation between profitability and debt to equity ratio, and the negative share price reaction on announcement of an equity issue (i.e. information asymmetric).
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