This paper analyses some of the empirical implications of the pecking order theory in the Spanish market using a panel data analysis of 1,566 firms over 1994-2000. The results show that the pecking order theory holds for most subsamples analyzed, particularly for the small and medium-sized enterprises and for the high-growth and highly leveraged companies. It is also shown that both the more and the less leveraged firms tend to converge towards more balanced capital structures. Finally, we observe that firms finance their funds flow deficits with long term debt.