Determinants of Leverage of the Companies Listed on the Official Market of the Macedonian Stock Exchange

Abstract

The decisions pertaining to the choice of the type of financing are ones of paramount importance for every company, since they have a direct impact on its profitability. Adequate choice of capital structure can minimize the overall cost of financing, which, in turn, leads to maximizing the value of the company. The focus of this paper is to establish and examine the determinants that influence the leverage of the companies listed on the Macedonian Stock Exchange. For this purpose, the Fixed Effects Panel Regression model is used on a sample data that consists of 36 companies, out of which 16 are on the exchange listing and the remaining 20 are on the mandatory listing on the Macedonian Stock Exchange. The data for the analysis is collected from the audited financial statements of these companies for a period of 5 years, starting from 2017 to 2021. The results of the research imply that only two of the total five analyzed variables have certain impact on the capital structure of the companies, while the other three are statistically insignificant and have a negative impact on the leverage. Profitability and tangibility are variables that have statistically significant influence on the leverage of the Macedonian companies, while liquidity, free cash flow and the size of the companies are not statistically significant variables according to this analysis.