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Financing preferences: evidence from the Korean market

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  • Soon Suk Yoon
  • Hyo Jin Kim
  • Hongbok Lee
  • Doug Waggle

Abstract

We investigate the financing decisions of Korean firms during the period of 1996–2015. Korean firms follow a matching strategy for funding their cash needs. Cash inflows from investing activities are the primary source of funding for capital expenditures, and cash inflows from financing activities are the major means of covering cash outflows from financing activities. We also find that Korean firms’ financing practice of handling cash deficits can be described by the pecking order model modified and augmented by cash flow variables. Cash inflows from investing activities account for the major portion of financing to make up for cash deficits, followed by short- and long-term debt, and then equity financing.

Suggested Citation

  • Soon Suk Yoon & Hyo Jin Kim & Hongbok Lee & Doug Waggle, 2017. "Financing preferences: evidence from the Korean market," Applied Economics, Taylor & Francis Journals, vol. 49(44), pages 4501-4520, September.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:44:p:4501-4520
    DOI: 10.1080/00036846.2017.1284993
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