Determinants of capital structure: An empirical study of companies from selected post-transition economies
Journal
Zbornik radova Ekonomskog fakulteta u Rijeci
Date Issued
2016-02
Author(s)
DOI
doi: 10.18045/zbefri.2016.1.119
Abstract
The goal of this paper is to examine if there are any determinants that
systematically influence the capital structure of the companies in the Balkan
countries and to determine if any of the existing capital structure theories are
relevant in their case. We apply a panel regression on a sample consisting of the
largest and most frequently traded joint-stock companies from four countries. The
results show that the larger companies and those with higher fixed asset
investments exhibit higher leverage, while the more profitable companies and
those with more tangible assets use less debt financing. Other variables, such as
the concentration of company ownership, the riskiness of its operating profits and
the effective tax rates have not been found statistically significant. These results,
supported by the robustness tests, have confirmed our expectation that the
managers in these countries do not set specific target leverage ratios, but instead
follow a particular order in the selection of the sources of financing. In other
words, the companies behave in accordance with the pecking order theory, which
is a confirmation of our initial hypothesis. The governments of these countries
should put more effort on stimulating the use of other sources of financing to
relieve the possible excessive company dependence on the banking sector.
systematically influence the capital structure of the companies in the Balkan
countries and to determine if any of the existing capital structure theories are
relevant in their case. We apply a panel regression on a sample consisting of the
largest and most frequently traded joint-stock companies from four countries. The
results show that the larger companies and those with higher fixed asset
investments exhibit higher leverage, while the more profitable companies and
those with more tangible assets use less debt financing. Other variables, such as
the concentration of company ownership, the riskiness of its operating profits and
the effective tax rates have not been found statistically significant. These results,
supported by the robustness tests, have confirmed our expectation that the
managers in these countries do not set specific target leverage ratios, but instead
follow a particular order in the selection of the sources of financing. In other
words, the companies behave in accordance with the pecking order theory, which
is a confirmation of our initial hypothesis. The governments of these countries
should put more effort on stimulating the use of other sources of financing to
relieve the possible excessive company dependence on the banking sector.
Subjects