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Capital structure ? Romanian and Eastern-Europe companies

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  • Liviu-Adrian ?aga

    (Academy of Economic Studies)

Abstract

This paper analyses company?s capital structure using a sample of listed companies on a ten year period. It mainly tackles one of the most debated issues in corporate finance, the relationship between profitability and debt level of a company. Shareholder funds are considered at book value, while profitability is counted as profit on total assets. The study tries to answer the question of whether the structural changes in Romanian economy, regarding cost and availability of capital, have affected, or were affected by the profit making capacity of companies. After analyzing Romanian companies sample, the new objective was to compare it with a set of listed companies from emerging economies of Eastern Europe member states. By this it was intended to compare the results and see if there is any particularity for Romanian firms. Linear regression method is used through a panel data random effects model. Results confirmed past studies as negative relationship between leveraging and profitability was found. This finding is in line with pecking order theory of capital structure and contradicts trade-off and signal theory for Romanian listed companies.

Suggested Citation

  • Liviu-Adrian ?aga, 2015. "Capital structure ? Romanian and Eastern-Europe companies," Proceedings of International Academic Conferences 1003806, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:1003806
    as

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    File URL: https://iises.net/proceedings/international-academic-conference-rome/table-of-content/detail?cid=10&iid=177&rid=3806
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    References listed on IDEAS

    as
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    4. ., 2007. "The Role of Law in Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 1, Edward Elgar Publishing.
    5. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    6. Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1‐2), pages 175-198, January.
    7. ., 2007. "Empirical Analysis of the Law and Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 5, Edward Elgar Publishing.
    8. Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1-2), pages 175-198.
    9. ., 2007. "The Economics of the Law and Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 2, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. TAGA Liviu-Adrian & ILIE Vasile, 2017. "Capital Structure On Romanian Listed Companies - A Post Crisis Insight," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 69(3), pages 123-132, August.

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    More about this item

    Keywords

    capital structure; performances; trade-off theory; leverage; pecking order theory; Romania; panel data;
    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

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