The Pecking Order view on capital structure....

Argues that firm's first choice for capital is new equity due to the fact that dividends are not contractually required.

Argues that the firm's first choice for capital is new debt as interest payments are tax-deductible.

Argues that a firm's first choice for capital is retained earnings as there is no informational cost associated with using retained earnings.

Argues that firms are indifferent between new equity, debt and retained earnings as sources of capital.