Analysis of Corporate Financing Behavior Based on Pecking Order Theory: Evidence from BYD

Abstract

Corporate financing behavior is of vital importance in the field of corporate finance, and the Pecking Order Theory is one of the major theories of capital structure. The Pecking Order Theory of Western financing is derived from empirical research. However, in view of the claim in previous literature that this theory becomes a paradox in China, this paper takes BYD, an influential new energy vehicle enterprise, as the research object. With the help of BYD's financing data from 2020 to 2024, this paper expounds on BYD's development history and financing situation, analyzes the fit between its financing behavior and the theory, and finds that it is not a paradox. Instead, there are problems such as the mismatch between retained earnings and investment growth, liquidity problems caused by the short - term nature of bond financing, insufficient utilization of equity financing and shortage of long - term capital. Furthermore, countermeasures such as improving internal financing efficiency and optimizing debt and equity financing are proposed, which not only enriches the application of this theory but also provides guidance for similar enterprises.