The determinants of capital structure: the evidence from the European Union

Abstract

MOKHOVA NATALIA, ZINECKER MAREK: The determinants of capital structure: the evidence from the European Union. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, LXI, No. 7, pp. 2533-2546 The aim of this study is to indicate the infl uence of several internal determinants on capital structure in diff erent European countries and retrace its tendency taking into consideration the membership of the European Union. Nowadays there are a lot of debates according the future of the European Union. The recent global fi nancial crisis and the following European debt crisis show the signifi cance of the country fi nancial stability and its impact on the private sector. The paper investigates 32 countries of European Union dividing them into three groups as (1) old EU members (15 countries), (2) new EU members (12 countries) and (3) EU candidates (4 candidate countries and 1 acceding country). The managers make their fi nancial decisions according to the source of fi nancing and capital structure based on the macroeconomic conditions and country specifi cs and obviously on company's advantages and disadvantages, i.e. its internal characteristics. Based on the analysis of previous studies we have chosen several signifi cant internal determinants of capital structure as profi tability, tangibility, growth opportunities, non-debt tax shields and fi rm's size. The fi ndings show that the country's specifi cs, EU membership and corporate debt structure infl uence the relation between capital structure and its internal characteristics. The capital structure in all countries has tendency to increase, furthermore the old members rely more on debt then candidates or new members. There is no doubt that the majority of countries support Pecking Order Theory then Trade off Theory regarding investigated relations. In most countries the profi tability and size have negative and signifi cant infl uence on corporate capital structure. At the same time tangibility, growth opportunities and non-debt tax shields split up: selected countries experience positive impact, another part negative, supporting diff erent theories. capital structure, fi nancial performance, European Union, determinantsThere are a lot of discussions nowadays concerning the future of European Union (EU): should it stand against the following economic shocks and be treated from fi nancial contagion on macro level or separately? However, some countries are still willing to be part of EU. First of all, the main reason is expected economic growth due to the increased foreign investments from EU members. Another reason concerns the fi nancial aids for economic development in the case of crisis. The migration issue has been taken into consideration as well, as it will infl uence the employment rate and standards of living. Nevertheless, in order to be a true member of EU, the members and candidates have to meet so called convergence criteria (Maastricht criteria), which regulate the fi nancial stability of a country. The countries are contro...

Pecking Order and Trade – off Capital Structure Theories in the European Countries Supported by European Stability Mechanism

“…These results strengthen the robustness of the estimated regression (1) and (2). Previous studies supported that the pecking order hypothesis hold a dominant position in explaining the Cypriot firms' managers' decisions about the capital structure (Mokhova & Zinecker, 2013;Machielsen, 2012). The present results are in partial agreement with them, since the presence of pecking order is intense during the first period.…”

Do European Union Funds Have an Impact on the Volume of Corporate Lending? The Case of the Czech Republic, Slovakia and Poland

“…The change in the structure of capital financing companies may be influenced, among others, by EU funds distributed for specific purposes, but also by the level of development within the community (Mokhova and Zinecker, 2013). On the one hand, EU funds make it possible to even out differences in the development of companies in less developed regions (such as Poland, Slovakia or the Czech Republic) with highly developed EU countries (such as Germany, France).…”

Do European Firms Behave as if they Converge toward a Target Capital Structure?

“…Mokhova and Zinecker () find that EU membership influences corporate capital structure. To extend upon this work, we are interested in the differences in leveraging dynamics between firms from old versus new EU member states.…”

“…Moreover, we would seek to investigate the effect of firm size, ownership structure, political and geographical region, as well as crisis on capital structure dynamics. Mokhova and Zinecker (2013) find that EU membership influences corporate capital structure. To extend upon this work, we are interested in the differences in leveraging dynamics between firms from old versus new EU member states.…”