Capital structure formation in stock exchange listed companies of the Visegrad Group: a dynamic approach
Authors:   Department of Corporate Finance, Faculty of Management, University of Gdańsk, Gostkowska-Drzewicka Magdalena , Majerowska Ewa ,   Department of Econometrics, Faculty of Management, University of Gdańsk
Published: February 2023

Purpose: The article aims to analyze the impact of selected factors on the level of financial leverage in stock exchanges listed companies of the Visegrad Group, and to determine whether the direction of this impact is consistent with the assumptions of the trade-off theory or the pecking order theory. Design/methodology/approach: The analysis covered 259 non-financial companies listed in the years 1998-2020 on the stock exchanges in the Visegrad Group countries. The results of the dynamic panel econometric model estimates were verified via appropriate statistical tests. The calculations were carried out using the Gretl package. The subject of the analysis entailed the impact of profitability, liquidity, growth opportunities, company size and asset structure on the capital structure of the entities under examination. Findings: Taking the country-specific effect into account, it has been demonstrated that the company capital structure decisions are consistent with the pecking order theory. Considering the companies surveyed as separate panels, in distribution by each individual country, a negative, a statistically significant correlation has been confirmed between debt and profitability only. Relative to other factors, divergent results were obtained for individual Visegrad Group countries, which does not negate the validity of the statement that the capital structure decisions of the companies analyzed are consistent with the pecking order theory. The dynamic nature of capital structure was confirmed for all Visegrad Group companies, considered collectively and individually, except for Poland. Research limitations/implications: The research takes into account only quoted companies, so its results do not explain capital structure behavior of other companies. The research is a contribution to further analyses of the capital structure, which covers all types of enterprises. Practical implications: Knowing the characteristics describing the activities of a given company and the country in which the company operates, analysts can determine on the basis of estimated models what capital structure is typical for a given company. In addition, the analyst is able to identify the effect of the country, i.e. compare companies in terms of capital structure. Originality/value: The study takes into account the impact of ‘country factor’. It made possible to identify main internal factors characterizing capital structure of the enterprises operating in different economic conditions. Moreover, dynamic nature of capital structure was taken into account. The results can be generalized for all V4’s companies listed on the stock exchange. The conducted research may be addressed to analysts, investors and managers of companies as well as researchers conducting research in this area. Keywords: capital structure, pecking order theory, trade-off theory, panel modeling, Visegrad Group countries. Category of the paper: Research paper.