The leading piece of theoretical research in corporate finance is Myer

The leading piece of theoretical research in corporate finance is Myers and Majluf (1984).

They showed that when there is information asymmetry between the market and managers, a pecking order emerges in terms of how the firm should obtain funds for capital investments. Specifically, a firm would prefer to use:
a. debt, then retained earnings, and finally outside equity.
b. retained earnings, then debt, and finally outside equity.
c. retained earnings, then outside equity, and finally debt.
d. debt, then outside equity, and finally retained earnings.

ANSWER

B