What is it about?
The aim of the article is to determine the capital structure which is used by selected polish listed companies on the Index WIG20 of the Warsaw Stock of Exchange (WSE).
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Why is it important?
Evidences from the article generally suggests the relevance of the pecking order hypothesis in explaining the financing choices of Polish firms. Companies have some preferences regarding their financing. First, the highest preference is to use internal financing (retained earnings and the effects of depreciation) before resorting to any form of external funds as they have a low level of fixed assets. Secondly, Polish companies rely on short-term debt either because of undeveloped bond market or due to high-cost long-term bank debt. Companies are using retained earnings for financing themselves and automatically reduce the level of dividends which maybe payed to shareholders. Instead of emitting new shares which maybe undervalued, companies prefer to take loans in spite of high credit costs in Poland in comparison to other European countries.
Perspectives
The article also emphasized that capital structure choice may be the result of a complex interaction of many institutional features and business practices that are not fully captured by differences in the legal systems, which is especially important such as Poland where the legal system is quickly changing due to new politicians at the head of the state. All industry variable coefficients are statistically important and do confirm differences in capital structure among industries. This a topic which can be covered within a future article.
PhD. Nicolas Levi
Institute of Mediterranean and Oriental Studies of the Polish Academy of Sciences
Read the Original
This page is a summary of: The Determinants of Capital Structure: Evidence from companies listed on the WIG20 index of the Warsaw Stock of Exchange, Journal of Modern Science, January 2018, Wyzsza Szkola Gospodarki Euroregionalnej im. Alcide de Gasperi w Jozefowie,
DOI: 10.13166/jms/81223.
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