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Institutional Determinants of Equity Financing in Austria

Author

Listed:
  • Werner Dirschmid

    (Oesterreichische Nationalbank)

  • Walter Waschiczek

    (Oesterreichische Nationalbank, Economic Analysis Division)

Abstract

This study examines which institutional determinants are chiefly responsible for the fact that the capital structure of Austrian companies is dominated by debt. An international comparison shows that company taxation is generally not financing-neutral and, given the observed differences in equity ratios between countries, cannot be the primary factor influencing capital structure choice. Instead, the nature of creditor protections, which determine the position of investors and lenders in the event of bankruptcy, is probably a far more decisive factor. Equity ratios decline in parallel with creditor-friendly provisions across countries. Because of the predominance of small and medium-sized enterprises (SMEs) in Austria, the Hausbank principle plays an important role in determining capital structure. The associated intensive exchange of information between banks and companies allows borrowings to take on the functions usually performed by equity. In the future, financial market innovations and the transfer of severance pay and pension entitlements to outside institutions could have an influence on capital structure.

Suggested Citation

  • Werner Dirschmid & Walter Waschiczek, 2005. "Institutional Determinants of Equity Financing in Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 9, pages 77-92.
  • Handle: RePEc:onb:oenbfs:y:2005:i:9:b:2
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    File URL: https://www.oenb.at/dam/jcr:48894130-af10-43cc-b594-b423d1d5a144/fsr_09_special_02_tcm16-29256.pdf
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    Citations

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    Cited by:

    1. Helmut Elsinger & Robert Köck & Marcel Kropp & Walter Waschiczek, 2016. "Corporate financing in Austria in the run-up to capital markets union (This study is also available in German)," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 31, pages 96-119.
    2. Christian Beer & Walter Waschiczek, 2019. "Equity ratios of Austrian nonfinancial corporations – evidence from balance sheet data," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 19/Q3, pages 25-41.
    3. Christian Beer & Walter Waschiczek, 2019. "Equity ratios of Austrian nonfinancial corporations – evidence from balance sheet data," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/19, pages 25-41.
    4. Johannes Jäger & Vanessa Redak, 2006. "Austrian Banks’ Lending and Loan Pricing Strategies against the Background of Basel II," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 12, pages 92-103.

    More about this item

    Keywords

    Financing Policy; Bankruptcy;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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