Financing Decision of High-tech SMEs in Korea: A Revisitation to Pecking Order Theory

摘要

The purpose of this study is to revisit the pecking order theory, one of the major theories in explaining financing decision of a firm in terms of high-tech SMEs. In particular, based on the theory of the financial growth cycle, which extended the theory, I aim to confirm how characteristics of a firm change the prediction of the theory. To this end, I modelled simultaneous decision-making on internal financing, external debt and external equity financing that existing studies did not reflect by suitable data and method. According to the results, only the size is relevant for the prediction of pecking order theory, but R&D expenditures and intangible assets ratio which are main characteristics of high-tech SMEs are not consistent with the prediction. As a policy suggestion, since the unique characteristics of high-tech SMEs make external equity financing preferred the most and it has a smaller decreasing marginal utility for business than other financial instruments, it is needed to foster access to external equity financing.