Capital Structures in Emerging Stock Markets: The Case of Hungary

Abstract

This paper studies developments in the Hungarian capital markets during 1992-95 and investigates the determinants of the capital structures of companies listed on the Budapest Stock Exchange. Hungarian companies had very low leverage ratios. Empirical findings indicate that the negative relationship between leverage and proportion of tangible assets was primarily caused by the lack of long-term debt financing. The relationship between leverage and the size of the company provides some indication of the importance of trade credits for the companies. The more profitable companies had less debt than less profitable ones. This is attributed to the firms' financial incentives aggravated by the segmentation of Hungarian credit markets and credit rationing within the financial environment. Manufacturing firms and firms with the state among their major shareholders enjoyed higher levels of debt financing relative to other companies.

The Firm-Specific Determinants of the Target Capital Structure: Evidence from Bosnia and Herzegovina Panel Data

“…The negative correlation of share of tangible assets and leverage is valid for the whole period, which is in line with the evidence from the previous studies (Cornelli, Portes& Schaffer, 1996;Nivorozhkin, 2002). This is due to the dominance of short-term debt in total debt, which does not necessarily require collateral.…”

Does Corporate Capital Structure influence Corporate Financial Performance in Developing Economies? Evidence from East African Stock Markets

“…In Summary, the results shown on Tables (Table 10-15) indicate that capital structure, in general speaking has a negative and statistically significant influence on East African listed firm's financial performance at 5% significance level, which suggest that an increase in capital structure (STDR,LTDR and TDR) will result to a decrease in corporate financial performance (ROA and ROE).These results show that in average profitable listed firms in East African prefers to use internal source of financing in their capital structure as compared to external source of financing (like Debts-STDR,LTDR and TDR),the possible reasons for this situation is due several reasons such as Information asymmetry problems and financial markets in the East African region are still developing, hence it's difficult for profitable firms to access the external sources of financing (Like Corporate bonds), therefore decided to depend much on internal sources of financing (Like Bank borrowings) (Mwambuli,2015).Furthermore this results are supporting pecking order theory and our results are consistent with the findings of previous studies such as Kaumbuthu (2011), Karadeniz et al (2009), Zeitun & Tian (2007, Rao et al (2007), Huang & Sang (2006), Goddard et al (2005), Ngobo & Capiez (2004), Eriotis et al (2002), Fama & French (2002), Gleason et al (2000), Simerly & Li (2000), Majumdar & Chhibber (1999), Crnigol & Mramor (2009), Klapper & Tzioumis (2008), Dragota & Smenescu (2008), Song (2005), Chen (2004), Bauer (2004), Hall et al (2004), Deesomsak et al (2004), Cassar & Holmes (2003), Esperanca et al (2003), Nivorozhkin (2002), Shyam-Sunder & Myers (1999), Friend International Finance and Banking ISSN 2374-20892016, Vol. 3, No.…”

“…This positive relationship between capital structure and corporate financial performance is supporting trade-off theory of capital structure. Esperanca et al (2003), Nivorozhkin (2002), Shyam-Sunder & Myers (1999), Friend & Lang (1988), Malanic et al (2013). As for this negative relationship, these studies gives the evidence that profitable firms will have higher amount of earnings, hence higher amount retaining earnings after the end of the financial year and this will automatically boost their internal source of financing, therefore these kind of firms will prefer to finance their operations and growth through internal financing (retained earnings) because it's very cheap as compared to external source of financing like Loan/debt finance, hence these profitable firms will have a small portion of debts in their capital structure.…”

What managers think of capital structure and how they act: Evidence from Central and Eastern Europe

“…positively, a remarkably high ratio even if we take into account that a substantial number of firms target short-term loans. It seems that the CEE business environment has substantially changed since the era of Nivorozhkin (2002Nivorozhkin ( , 2004Nivorozhkin ( , 2005, a period when even the largest listed companies suffered from severe credit rationing problems that restrained their development. The presence of a more mature banking system and the availability of external credit are even more explicative considering that, based on our survey, 94% of all debt and capital lease applications were approved between 2005 and 2008.…”

“…Nivorozhkin (2002) shows that Hungarian listed firms used excessively low debt compared to Western standards in the early 90s. Later, Nivorozhkin (2005) and Delcoure (2007) both find that, despite the considerable progress CEE countries have made in their financial markets and institutions from 2000 to the present following regime change, debt is still relatively underused.…”