The choice of external financing source: The role of company size and stock liquidity
This paper aims to answer whether firms of different sizes and stock liquidities differ in the choice of external sources of financing in companies listed in CEE countries. To this end the net debt issuance is regressed on the financial deficit. In regressions Pecking Order Coefficients are allowed...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Sciendo
2023-10-01
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| Series: | Economics and Business Review |
| Subjects: | |
| Online Access: | https://doi.org/10.18559/ebr.2023.3.800 |
| _version_ | 1797659574635855872 |
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| author | Stereńczak Szymon Kubiak Jarosław |
| author_facet | Stereńczak Szymon Kubiak Jarosław |
| author_sort | Stereńczak Szymon |
| collection | DOAJ |
| description | This paper aims to answer whether firms of different sizes and stock liquidities differ in the choice of external sources of financing in companies listed in CEE countries. To this end the net debt issuance is regressed on the financial deficit. In regressions Pecking Order Coefficients are allowed to vary across firms with different sizes and stock liquidities. The results indicate that companies with less liquid shares prefer issuing debt to cover financial deficits more than companies with more liquid shares. This implies that stock liquidity may substitute debt issuance in alleviating the adverse effects of information asymmetry, especially in relatively small companies. This is the first study in which the relationship between liquidity and debt-equity choice is considered solely from a pecking order theory point of view. Also this is the first study in which stock liquidity effects on capital structure are studied in the CEE countries. Research results may point to the advantages of increasing the liquidity of shares which may contribute to reducing information asymmetry and thus a better allocation of resources. |
| first_indexed | 2024-03-11T18:17:09Z |
| format | Article |
| id | doaj.art-59886a75a22d47ceba9ddc7731b8162d |
| institution | Directory Open Access Journal |
| issn | 2450-0097 |
| language | English |
| last_indexed | 2024-03-11T18:17:09Z |
| publishDate | 2023-10-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Economics and Business Review |
| spelling | doaj.art-59886a75a22d47ceba9ddc7731b8162d2023-10-16T06:07:19ZengSciendoEconomics and Business Review2450-00972023-10-0193446510.18559/ebr.2023.3.800The choice of external financing source: The role of company size and stock liquidityStereńczak Szymon0Kubiak Jarosław11Department of Corporate Finance, Poznań University of Economics and Business, al. Niepodległości 10, 61-875Poznań, Poland.2Department of Corporate Finance, Poznań University of Economics and Business, al. Niepodległości 10, 61-875Poznań, PolandThis paper aims to answer whether firms of different sizes and stock liquidities differ in the choice of external sources of financing in companies listed in CEE countries. To this end the net debt issuance is regressed on the financial deficit. In regressions Pecking Order Coefficients are allowed to vary across firms with different sizes and stock liquidities. The results indicate that companies with less liquid shares prefer issuing debt to cover financial deficits more than companies with more liquid shares. This implies that stock liquidity may substitute debt issuance in alleviating the adverse effects of information asymmetry, especially in relatively small companies. This is the first study in which the relationship between liquidity and debt-equity choice is considered solely from a pecking order theory point of view. Also this is the first study in which stock liquidity effects on capital structure are studied in the CEE countries. Research results may point to the advantages of increasing the liquidity of shares which may contribute to reducing information asymmetry and thus a better allocation of resources.https://doi.org/10.18559/ebr.2023.3.800stock liquiditydebt-equity choiceexternal financingfinancial deficitpecking order theoryg12g14g15g32 |
| spellingShingle | Stereńczak Szymon Kubiak Jarosław The choice of external financing source: The role of company size and stock liquidity Economics and Business Review stock liquidity debt-equity choice external financing financial deficit pecking order theory g12 g14 g15 g32 |
| title | The choice of external financing source: The role of company size and stock liquidity |
| title_full | The choice of external financing source: The role of company size and stock liquidity |
| title_fullStr | The choice of external financing source: The role of company size and stock liquidity |
| title_full_unstemmed | The choice of external financing source: The role of company size and stock liquidity |
| title_short | The choice of external financing source: The role of company size and stock liquidity |
| title_sort | choice of external financing source the role of company size and stock liquidity |
| topic | stock liquidity debt-equity choice external financing financial deficit pecking order theory g12 g14 g15 g32 |
| url | https://doi.org/10.18559/ebr.2023.3.800 |
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