CAPITAL STRUCTURE AND FIRM PERFORMANCE: THE CASE OF CENTRAL AND EASTERN EUROPEAN ECONOMIES

• Authors: Brendea Gabriela , Pop Fănuța , Mihalca Loredana
• Languages of publication: EN

Abstracts

EN

The current study examines the relationship between capital structure and firm performance for a sample of non-financial firms from eight Central and Eastern European countries in the period 2008 – 2017. Based on the agency costs hypothesis, we investigate whether debt ratio as a proxy for capital structure has a positive relationship with firm performance for the countries included in the sample. The results indicate a negative relationship between these variables and, thus, they did not support the agency costs hypothesis. In addition, we test the reverse causality from performance to capital structure based on two opposite hypotheses, that is, the efficiency-risk and the franchise-value hypo-thesis. The results support the franchise-value hypothesis, indicating a negative relationship between debt ratio and firm performance.

Keywords

EN

CAPITAL STRUCTURE; DEBT RATIO; FRANCHISE-VALUE HYPOTHESIS; EFFICIENCY-RISK HYPOTHESIS; FIRM PERFORMANCE; AGENCY COSTS; CEE COUNTRIES

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2022
• Volume: 70
• Issue: 5
• Pages: 430 – 449

Contributors

author

Brendea Gabriela

• Babeș-Bolyai University, Department of Economics and Business Administration in German, Teodor Mihali 58-60, 400591 Cluj-Napoca, Romania

author

Pop Fănuța

author

Mihalca Loredana

Identifiers

DOI

https://doi.org/10.31577/ekoncas.2022.05.03