TESTING THE RELEVANCE OF ALTERNATIVE CAPITAL STRUCTURE THEORIES IN SERBIAN ECONOMY

Predrag Stančić, Marina Janković, Milan Čupić

Abstract


Decisions on capital structure and leverage can significantly determine the capabilities of the company to survive, grow and develop. However, there is as yet no unified theoretical viewpoint on the capital structure that maximizes company value. The objective of this study is to investigate the relevance of alternative capital structure theories in Serbian economy by analyzing the influence of company’s financial performances on the leverage. The research was conducted from 2008 to 2012 on a sample of 300 largest non-financial companies from Serbia ranked by revenue in 2012. We find that financial performances influence differently the capital structure of production and service companies. The results of our study are not in accordance with any capital structure theory taken into consideration. The relations between financial performances and capital structure observed in the study are typical of companies in developing economies.

Full Text:

PDF

References


Abor, J. (2008). Determinants of the capital structure of Ghanaian firms (AERC Research Paper No. 176). Nairobi: African Economic Research Consortium.

Antoniou, A., Guney, Y., & Paudyal, K. (2002). The Determinants of Corporate Capital Structure: Evidence from European Countries. Durham: University of Durham.

Baker, M., & Wurgler, J. (2000). The equity share in new issues and aggregate stock returns. Journal of Finance, 55(5), 2219‒2257. DOI: 10.1111/0022-1082.00285

Barclay, M.J., Heitzman, S.M., & Smith, C.W. (2013). Debt and taxes: Evidence from the real estate industry. Journal of Corporate Finance, 20, 74–93. DOI: 10.1016/j.jcorpfin.2012.12.002

Bauer, P. (2004). Determinants of capital structure: Empirical evidence from the Czech republic. Czech Journal of Economics and Finance, 54(1‒2), 2–21.

Bas, T., Muradoglu, G., & Phylaktis, K. (2009). Determinants of capital structure in developing countries (CBS Working Paper No. 106). London: Cass Business School.

Booth, L., Aivazian, V., Demirguc-Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. Journal of Finance, 56(1), 87–130. DOI: 10.1596/978-0-8213-6700-1

DeAngelo, H., & Ronald W. M. (1980). Optimal capital structure under corporate and personal taxation. Journal of Financial Economics, 8(1), 3–29. DOI: 10.1016/0304-405X(80)90019-7

Demirgüç-Kunt, A., & Maksimovic, V. (1999). Institutions, financial markets and firm debt maturity. Journal of Financial Economics, 54(3), 295–336. DOI: 10.1016/S0304-405X(99)00039-2

Drobetz, W., & Fix, R. (2005). What are the determinants of the capital structure? Some evidence for Switzerland. Swiss Journal of Economics and Statistics, 141(1), 71–113.

Fama, F.E., & French, K.R. (2005). Financing decisions: who issues stock? Journal of Financial Economics, 76(3), 549–582. DOI: 10.1016/j.jfineco.2004.10.003

Friend, I., & Lang, L.H.P. (1988). An empirical test of the impact of managerial self- interest on corporate capital structure. Journal of Finance, 43(2), 271–281. DOI: 10.2307/2328459

Gitman, L.J. (2003). Principles of Managerial Finance. Boston: Addison Wesley – Pearson education.

Green, C.J., Murinde, V., & Suppakitjarak, J. (2002). Corporate Financial Structure in India. South Asia Economic Journal, 4(2), 245–273. DOI: 10.1177/139156140300400205

Hernadi, P., & Ormos, M. (2012). Capital structure and its choice in central and eastern Europe. Acta Oeconomica, 62(2), 229–263. DOI: 10.1556/AOecon.62.2012.2.5

Hovakimian, A., Opler, T., & Titman, S. (2001). The debt-equity choice. Journal of Financial and Quantitative Analysis, 36(1), 1–24. DOI: 10.2307/2676195

Jensen, G.R., Lundstrum, L., & Miller, R. (2010). What do dividend reductions signal? Journal of Corporate Finance, 16(5), 736–747. DOI: 10.1016/j.jcorpfin.2010.06.009

Jensen, M. C. (1986). Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers. American Economic Review, 76(2), 323–329.

Jensen, M.C., & Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs, and capital structure. Journal of Financial Economics, 3(4), 305–360. DOI: 10.1016/0304-405X(76)90026-X

Kim, C., Mauer, D.C., & Sherman. A.E. (1998). The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis, 33(3), 335–359. DOI: 10.2307/2331099

Lipson, M.L., & Mortal, S. (2009). Liquidity and capital structure. Journal of Financial Markets, 12(4), 611–644. DOI: 10.1016/j.finmar.2009.04.002

Martin, J., Cox, S., & MacMinn, R. (1988). The Theory of Finance: Evidence and Application. Chicago: Dryden Press.

Ministarstvo finansija Republike Srbije. (2015). Makroekonomski podaci, 30. januar 2015. [Macroeconomic Data, 30 January 2015]. Preuzeto sa http://www.mfin.gov.rs/pages/article.php?id=11362.

Modigliani, F., & Miller, M. (1958). The cost of capital, corporation finance and the theory of investment. American Economic Review, 48(3), 261–297.

Modigliani, F., & Miller. M. (1963). Corporate income taxes and the cost of capital: a correction. American Economic Review, 53(3), 433–443.

Myers, S. C. (1993). Still searching for optimal capital structure. Journal of Applied Corporate Finance, 6(1), 4–14. DOI: 10.1111/j.1745-6622.1993.tb00369.x

Myers, S. C. (1984). The capital structure puzzle. Јournal of Finance, 39(3), 574–592. DOI: 10.1111/j.1540-6261.1984.tb03646.x

Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics. 5(2), 147–175. DOI: 10.1016/0304-405X(77)90015-0

Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economic Review, 13(2), 187–221. DOI: 10.1016/0304-405X(84)90023-0

Rajan, R., & Zingales, L. (1995). What do we know about capital structure? Some evidence from international data. Journal of Finance, 50(5), 1421–1460. DOI: 10.1111/j.1540-6261.1995.tb05184.x

Republički zavod za statistiku (2010). Klasifikacija delatnosti [Business Activity Classification]. Preuzeto sa http://webrzs.stat.gov.rs/WebSite/userFiles/file/ Klasifikacija%20delatnosti/Klasifikacija.pdf

Šarlija, N., & Harc, M. (2012). The impact of liquidity on the capital structure: a case study of Croatian firms. Business Systems Research, 3(1), 30–36. DOI: 10.2478/v10305-012-0005-1

Sakatan, R. (2010). The capital structure in developing countries: Saudi Arabia (Doctoral thesis). Retrieved from: http://ssrn.com/abstract=2144187.

Shyam-Sunder, L., & Myers, S. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), 219–244. DOI: 10.1016/S0304-405X(98)00051-8

Stančić, P. (2007). Kompromisna teorija strukture kapitala [Static Tradeoff Theory]. Računovodstvo, 51(1-2), 76–84.

Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. Journal of Finance, 43(1), 1–19.

Todorović, M. (2011). Psihologija i finansijski menadžment - bihevioralne korporativne finansije [Psychology and Financial Management – Behavioral Corporate Finance]. Ekonomika preduzeća, 59(5-6), 275–287. DOI: 10.5937/ekopre1106275T

Wald, J.K. (1999). How firm characteristics affect capital structure: an international comparison. Journal of Financial Research, 22(2), 161–187. DOI: 10.1111/j.1475-6803.1999.tb00721.x


Refbacks

  • There are currently no refbacks.


Print ISSN: 0353-7919
Online ISSN: 1820-7804