Regardless, firms still finance most of their investments with retained earnings (a recent paper from the Central Bank of Argentina shows that self-financing is still the preferred approach by firms worldwide).
This fact – also known as pecking order where firms choose own funds first, then debt, and equity last of all – reflects the existence of asymmetric information problems and intermediation costs, which make own funds more economical than third-party funds. This paper aims at analyzing how financial innovation brings for complementarities between institutions and markets and its implications for monetary policy.