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The Pecking Order Theory of Capital Structure Suggests That Managers

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The pecking order theory of capital structure suggests that managers will choose to utilize retained earnings before issuing additional debt when financing new projects. Does that imply anything about the flotation costs of issuing new securities?


Definitions:

Bureaucracy

An organizational structure characterized by standardized procedures, hierarchical division of responsibilities, and impersonal relationships designed to administer large organizations efficiently.

Nepotism

The practice of giving jobs or other advantages to relatives or close friends, regardless of their merit.

Self-Esteem

Someone's own perception of their significance or quality.

High-Quality Work

Work that surpasses ordinary standards of quality, often characterized by attention to detail, precision, and dedicated skill.

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