##  [Pecking Order Theory](/index.php/pecking-order-theory) 

  ##  [Pecking Order Theory](https://social.quantumdictionary.io/pecking-order-theory-0) 

  

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**Social Sciences Dictionary**

 







 

 

 

 



 

 

 

 

Definition

A corporate‑finance explanation that firms finance new investment by a hierarchical preference: first with internal funds (retained earnings), then with debt, and issue equity only as a last resort; the ordering arises from asymmetric information and the signaling and issuance costs associated with external finance rather than from a single optimal target leverage.