Journal of FinTech and Sustainable Finance

Articles

Vol. 1 (2025)

A Systematic Literature Review of the Pecking Order Theory on Financing Decisions

Submitted
November 14, 2025
Published
2025-11-14

Abstract

This study is a Systematic Literature Review (SLR) that aims to evaluate the application of Pecking Order Theory (POT) in corporate financing decisions published between 2020 and 2025. The article selection process was conducted using the PRISMA 2020 protocol, with relevant articles selected through a search in the Scopus database, based on inclusion criteria that included: time range (2020–2025), field of study (Business Management and Accounting), document type (article), keywords (Pecking Order Theory), language (English), and open access status. Of the total 1027 articles found, 31 articles met the inclusion criteria and were used as research objects. The results showed that POT theory remains relevant in explaining corporate financing behavior, especially in developing countries, although some findings indicate a combination with other theories, such as Trade-Off Theory (TOT). Empirical findings reveal that factors such as profitability, liquidity, company growth, and tangible assets have a significant influence on the order of corporate funding preferences, which begins with the utilization of internal funds, followed by debt, and finally the issuance of new shares. This study also reveals that although POT is widely applicable, its application shows variability influenced by factors such as economic context, regulations, and company characteristics.

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