[Verse 1] When companies need money to grow and expand They face a choice of where to make their stand Internal funds are sitting there so clean No outside eyes can see what they have seen Retained earnings flow without a fee No signals sent for all the world to see [Chorus] Internal first, then debt, then equity That's the pecking order, can't you see Information gaps make choices clear Keep your secrets when outsiders peer Internal first, then debt, then equity Pecking order theory, that's the key [Verse 2] When internal cash runs dry and thin Debt financing helps them win Lenders get their interest every year But don't own shares or interfere Less dilution than equity brings Cheaper than what new stock offering sings [Chorus] Internal first, then debt, then equity That's the pecking order, can't you see Information gaps make choices clear Keep your secrets when outsiders peer Internal first, then debt, then equity Pecking order theory, that's the key [Bridge] Why this order, what's the reason why Information asymmetry is the tie Managers know more than outside folks Bad signals when new equity provokes Market thinks you're overvalued and weak When new shares are what you seek [Verse 3] Equity comes last upon the list Though ownership control gets shared and missed New shareholders want their voting rights Dilution gives existing owners frights Only when debt capacity is maxed Do companies get their equity backed [Chorus] Internal first, then debt, then equity That's the pecking order, can't you see Information gaps make choices clear Keep your secrets when outsiders peer Internal first, then debt, then equity Pecking order theory, that's the key [Outro] Remember the sequence when companies need cash Internal, debt, equity - avoid the market crash Of confidence that new shares tend to bring Pecking order theory makes the financing sing
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