Abstract
How do managers set financial policy? The aim of this paper is to document the driving factors of the financial policy choice and to evaluate the relevance of two alternative theories, the trade-off theory and the pecking order theory. We use a database of 3,659 firms, over the period 1991-2002; our study relies upon the estimation of two qualitative variable models, a multinomial logit model and a nested logit model. We show that trade-off models are more pertinent than pecking-order models so as to explain the financial policy choice of a firm, but none of these models are sufficient to explain all our results
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