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Analyzing Capital Structure across Industries: Evidence from Croatia

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  • Bisera Karanović Gordana Nikolić Goran Karanović

    (Business School PAR, Rijeka, Croatia. Business School PAR, Rijeka, Croatia. Faculty of Tourism and Hospitality Management, University of Rijeka, Opatija, Croatia.)

Abstract

Capital structure refers to the delicate balance between equity and debt that a company uses to finance its assets. It is typically expressed as a debt-to-equity or debt-to-capital ratio, with the components usually located on the right side of the company’s balance sheet. Capital structure can exert great influence on the company’s risk profile and ability to leverage its operations. For this reason, the authors conducted an investigation of the capital structure of 16 joint stock companies listed on the Zagreb Stock Exchange comprising CROBEX, the equity index of Croatia for a three-year period starting in 2015 and ending in 2017. The study demonstrates that many CROBEX-listed companies are very risk averse and choose to remain debt-free. Some are, however, starting to discover the potential offered by financial leverage and have slowly started adjusting their capital structure. In conclusion, capital structure is slowly becoming an issue worthy of discussion on the corporate agendas in Croatia. JEL Classification: G32, N24, O16

Suggested Citation

  • Bisera Karanović Gordana Nikolić Goran Karanović, 2019. "Analyzing Capital Structure across Industries: Evidence from Croatia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 22(SCI2), pages 1-10, December.
    • Handle: RePEc:zag:zirebs:v:22:y:2019:i:sci2:p:1-10
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital structure; Debt ratio; Leverage; Financial analysis; Croatia;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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