Determinants of Debt-Equity Choice – Evidence from Poland

Abstract

The question of debt-equity choice has so far been widely discussed in literature. The aim of the paper is to analyse the determinants of capital structure of Polish enterprises. We analysed factors that may impact the indebtedness. This analysis fills in the gap in worldwide studies with the case of a country representing the group of „emerging markets”. The paper examines capital structure determinants of non-financial companies listed on the Warsaw Stock Exchange. We used five independent variables compatible with the up-to-date achievements in the field. The results indicate that there is an evidence of a significant negative relationship between the size of a company, its growth rate, profitability, tangibility and the level of total debt. The study shows positive relationship between growth prospects of the company and the debt level. The results of the study indicate that the pecking order theory better explains the changes in indebtedness of analysed companies than other capital structure theories. Obtained results are mostly consistent with earlier studies conducted in the Poland and with studies in Western economies.

Debt or Profit Shifting? Assessment of Corporate Tax Avoidance Practices across Lithuanian Companies

“…Generally, studies investigating the relationship between corporate debt and tax avoidance practices of such companies can be classified as single-country studies (Dwenger & Steiner, 2014;Kazmierska-Jozwiak et al, 2015;Merlo et al, 2020) or cross-country studies (Huizinga et al, 2008;Blouin et al, 2014;Møen et al, 2018, de Mooij & Liu, 2020. The majority of them employ regression models and study the relationship between the debt and the tax measures, and controlling for the other variables.…”

Firm level determinants of capital structure in Algeria

“…The main usual firm-level determinants of the capital structure are: the firm size, the profitability, the tangibility, the liquidity, the debt-tax shield and the non-debt tax shield (El-Diftar, 2020 ;Kaźmierska& al, 2015 ;Leary & Roberts 2014 ;Toumi & Dadene 2014 ;Chakraborty, 2010 ;Frank& Goyal, 2003, p. 240).…”

“…The debt ratio increases when the profitability ratio increases. The profitability variable is generally computed by following ratios: the ROA ratio (Return On Assets), the operating incomes to sales ratio, the operating incomes to total assets ratio (Kaźmierska-Jóźwiak& al, 2015 ;Chakraborty, 2010;Amraoui& al, 2018;Ilyukhin, 2017).…”

“…This company prefers to use the internal resources instead of the debt. The liquidity variable has a negative effect on the debt level (Ozkan, 2001;Kaźmierska-Jóźwiak& al, 2015). However, a company with a high liquidity level can easily support higher debt costs.…”

Determinants of choice between equity issuance, equity repurchase and debt issuance of South African companies listed on the Johannesburg Stock Exchange

“…According to Kazmierska-Jozwiak, Marszałek and Sekuła (2015), many authors indicate that a company's main determinant of capital choice is its size. However, Kazmierska-Jozwiak et al (2015) argue that results of the studies on the impact of the size on the structure of its capital are rather ambiguous. In accordance with the trade-off theory, larger companies are more likely to issue debt, while in accordance with the pecking order theory, smaller companies are more likely to issue equity.…”