Debt policy of companies in Czech Republic

Abstract

The attitude of companies towards the use of debt depends on many factors that can be generally called corporate debt policy. This paper deals with the debt policy of companies in Czech Republic, focusing on the factors affecting the appropriate amount of debt and their debt policy in general. The aim of this contribution is to reveal the dominant factors affecting companies in their debt policy decisions and to analyse the possible impact of the selected classifying factors on the firms' responses. The findings of this article are based on the data from the questionnaire survey conducted in 2016 and the subsequent statistical analysis of the responses. The most important factors affecting appropriate amount of debt proved to be financial flexibility and volatility of earnings and cash flows. For deciding on debt policy, the most important factor was insufficiency of internal funds. Statistical analysis revealed several differences in response to debt-policy questions according to the legal form of business, the industrial sector, the company size, and the origin of capital.

Factors affecting the capital structure: New evidence from GCC countries

“…Strýčková (2017) reported that Czech companies follow a pecking order in their financing mix and exhibit both the differences and similarities with their European and American counterparts. Similar results were reported by Strýčková (2019), providing yet more support for the pecking-order theory in Czech companies, where insufficiency of the internal finances and the earnings volatility were found to be the most significant factor for designing a firms' debt policy. Chen (2004) demonstrated that due to the differences in the institutional structure like the ownership concentration, financial constraints and legal structure, the firms in China follow a new pecking-order theory, i.e., retained earnings, then equity, and debt only as a last resort.…”

Pengaruh Liquidity, Earnings Management, dan Faktor Lainnya terhadap Nilai Perusahaan

“…Perusahaan dapat menjalankan debt policy apabila mengalami kekurangan dana atau membutuhkan tambahan dana. Pendanaan dari luar dengan menggunakan utang dapat memberikan sejumlah keuntungan bagi perusahaan, tetapi apabila digunakan berlebihan dan tidak direncanakan dengan baik dapat menimbulkan masalah yang serius dan timbulnya risiko (Strýčková 2019). Manajer di setiap perusahaan harus bisa mempertimbangkan risiko atas penggunaan utang dan memastikan proporsi penggunaan utang sudah sesuai.…”

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“…Debt financing enables a business to, among other things, consider and take advantage of investment opportunities that can help increase its value. In contrast, the excessive use of debt financing can cause a number of problems for a business [15]. The use of external capital for financing a business comes with the risk of bankruptcy [16].…”