The paper tests the pecking order theory of corporate leverage using a broad cross-section of publicly traded American firms from 1971 to 1998. Contrary to the theory, net equity issues track the financing deficit more closely than net debt issues. While large firms exhibit some aspects of pecking order behavior, the evidence is not robust to the inclusion of conventional leverage factors or the analysis of evidence from the 1990s. Financing deficit plays a declining role over time for firms of all sizes. The pecking order theory is rejected, and the authors find that the theory performs better for large firms with long uninterrupted trading records, rather than small high-growth firms, which are thought to face severe adverse selection problems. The changing population of public firms, with more small and unprofitable firms becoming publicly traded in the 1990s, accounts for part of the rejection of the pecking order theory.The paper tests the pecking order theory of corporate leverage using a broad cross-section of publicly traded American firms from 1971 to 1998. Contrary to the theory, net equity issues track the financing deficit more closely than net debt issues. While large firms exhibit some aspects of pecking order behavior, the evidence is not robust to the inclusion of conventional leverage factors or the analysis of evidence from the 1990s. Financing deficit plays a declining role over time for firms of all sizes. The pecking order theory is rejected, and the authors find that the theory performs better for large firms with long uninterrupted trading records, rather than small high-growth firms, which are thought to face severe adverse selection problems. The changing population of public firms, with more small and unprofitable firms becoming publicly traded in the 1990s, accounts for part of the rejection of the pecking order theory.