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Title: The effects of information environment on internal and external financing choices

Authors: Li-Kai Liao; Victoria S.P. Wang

Addresses: Department of Accountancy, Graduate Institute of Finance, National Cheng Kung University, Taiwan; Center for Innovative FinTech Business Models, National Cheng Kung University, No. 1, University Road, Tainan City, 701, Taiwan ' Department of Accounting, Management School, National Chung Hsing University, 250 Kuo Kwan Road, Taichung, 402, Taiwan

Abstract: This study examines the effects of the overall information environment on the choices of internal/external funding choices and on the decisions of debt/equity financing (Myers and Majluf, 1984). The empirical findings, whether the combination of all financial deficits or its four components, support the pecking order theory in the perspective of overall information environment. However, the pecking order behaviour does not hold if firms are under financial distress. After classifying sample into good/bad information environment, the results are consistent with the full sample. No evidence supports the pecking order theory when considering the persistence of financing policy.

Keywords: internal financing; external financing; information environment; financial deficits; pecking order theory.

DOI: 10.1504/IJBEX.2024.139116

International Journal of Business Excellence, 2024 Vol.33 No.1, pp.142 - 167

Received: 02 Mar 2021
Accepted: 17 May 2021
Published online: 14 Jun 2024 *