or just peck order
is a hierarchical system of social organization in animals. It was first described from the behaviour of poultry
by Thorleif Schjelderup-Ebbe
in 1921 under the German terms Hackordnung
and introduced into English in 1925. The original usage of "peck order" referred to expression of dominance of birds. Dominance in chicken is expressed in various behaviours including pecking which was used by Schjelderup-Ebbe as a measure of dominance . In his 1922 German-language article he noted that "defense and aggression in the hen is accomplished with the beak". This emphasis on pecking led most subsequent studies on fowl behaviour to use it as a primary observation. However, it was also noted that roosters tended to leap and use their feet in conflicts. The term dominance hierarchy
is more often used for this phenomenon in other animals.
It is a basic concept in social stratification and social hierarchy that has its counterpart in other animal species as well, including humans. Still, the term "pecking order" is often used synonymously as well, because the "pecking order" was the first studied example of the social hierarchy among animals.
The basic concept behind the establishment of the pecking order among, for example, chickens, is that it is necessary to determine who is the 'top chicken,' the 'bottom chicken' and where all the rest fit in between. The establishment of the dominance hierarchy is believed to reduce the incidence of intense conflicts that incur a greater expenditure of energy. The dominance level determines which individual gets preferential access to food and mates.
Pecking order theory in finance
Donaldson observed that firms prefer first to finance investment with retained earnings, then, when they need outside funding, they prefer to issue debt instead of equity.
It suggests that capital structures are determined largely by the history of needs for external finance. Pecking-order theory explains negative intra-industry correlation between profitability and debt-equity ratio, and the negative share price reaction on announcement of an equity issue (i.e. information asymmetric).
- Schjelderup-Ebbe T (1975) Contributions to the social psychology of the domestic chicken [Schleidt M. Schleidt WM, translators]. In Schein MW (ed); "Social Hierarchy and Dominance. Benchmark Papers in Animal Behavior, Volume 3." Stroudsburg, PA: Dowden, Hutchinson and Ross, pp 35-49. (Reprinted from Zeitschrift fuer Psychologie, 1922, 88:225-252.)
- Pinder, S. (Jun, 2007). Financing Decisions. University of Melbourne Financial Management (333-641) lecture notes.
- Peirson, G., Brown, R., Easton, S. & Howard, P. (2003). Business Finance. North Ryde, NSW, Australia: McGraw-Hill Australia. ISBN 0-07-471439-2.