The influence of recession and macroeconomic variables on sectorial capital structure

Abstract

The aim of this paper is to analyze the influence of the recent recession and of macroeconomic variables over the indebtedness in Brazilian industry sectors. The gap derives from the preference for investigating the reaction of capital structure according to economic sectors. However, it has to be considered that industry sectors react differently to variations in the economic context, since they have different optimal points of capital structure composition. The relevance of the chosen topic lies in carrying out a sectorial analysis of the effect of recession and of macroeconomic variables on capital structure composition, identifying the most sensitive sectors. It is also relevant in terms of being based on classical financial theories applied to the current context, in order to help predict the proportion of debt given fluctuations in a set of macroeconomic variables. Standing out among the main contributions of this article are the analysis of the level of indebtedness of Brazilian companies given the occurrence of recession and variations in the macroeconomy, identifying sectors that are most exposed to modifying their capital structure due to these factors. Six research hypotheses were formulated and tested using multiple linear regression, with two-stage fixed effects based on panel data collected from 211 companies, classified into six sectors, with data relating to the first quarter of 2010 up to the first quarter of 2018. The results revealed that the recent Brazilian recession was relevant for the capital structure of the sectors studied, with inflation only being significant for the health sector. The level of indebtedness of the basic materials sector was shown to be the most dependent on economic fluctuations and that of telephony and utilities was shown to be the least dependent. In addition, it was verified that the company-specific variables have greater relevance in determining capital structure compared to the macroeconomic ones.

Preferences, sources, and conditionals: a new approach to testing financing decisions

“…In the reviewed national literature, as mentioned by Bittencourt and Albuquerque (2018), there is a predominance of approaches that analyze the relationship between a company's indebtedness level and its indirect determinants, from the perspective of various theories of capital structure. In this type of approach, with variations, evidence could be identified that Brazilian companies follow the POT, just as in Bastos and Nakamura (2009), Cardoso andPinheiro (2020), andCorrea et al (2013). Tristão and Sonza (2019), in turn, identified results consistent with the search for an optimal indebtedness level and Nakamura et al (2007) and Oliveira et al (2013) identified mixed results, which did not allow the corroboration of any theory, based on the Brazilian companies under analysis.…”

Effect of Speed of Adjustments on Capital Structure Decision: A Conceptual Analysis

“…One way to achieve and attain the optimum speed of adjustments is to determine a generalised predictor and aggregated factors that influence it (Gan and Chen, 2021;Giovanni et al, 2021;Cardoso and Pinheiro, 2020;Ezeani, 2019). For example, Haron et al (2013) argued that the speed of adjustment relies on the firm's size and period due to the adjustment costs incurred by the firms.…”

“…While Bolarinwe and Adegboye (2020) re-examined the determinants of capital structure in Nigeria using a combination of models like difference generalised method of moments (GMM), system GMM and stochastic frontier analysis (SFA). However, some studies which concentrated on developed countries found contrasting results, while fewer studies were on developing countries (Bajaj et al, 2020;Cardoso and Pinheiro, 2020;Goel, 2019;Ganiyu et al, 2018). The limited study in developing countries like Nigeria may create a misleading assumption that the theory and estimators applied in developed countries can be sustained and generalised in developing countries.…”

“…Furthermore, there is a need to understand the effect of intervening variables that may determine the optimisation level and influence the speed of adjustments. These include economic cycle and macroeconomics variables (Gan and Chen, 2021;Giovanni et al, 2021;Cardoso and Pinheiro, 2020), efficiencies of cost and production (Bolarinwa and Adegboye, 2020), Corruption (Ezeani, 2019), and assets maturity along with an inconsistent measure for growth opportunities (Warmana et al, 2020;Arief et al, 2020). Ignoring any controllable factor during the study may reduce the validity of the work, especially when the variables are determining factors that lead economic risk to override business risks.…”

Dívida pública e endividamento corporativo: existe um efeito de crowding out no Brasil?

“…A variável Retorno Ações, calculada com base na variação anual do IBOVESPA serve como uma proxy para as condições gerais do mercado acionário. Pela ótica do market timing (Baker & Wurgler, 2002) sugerido pela teoria e evidências empíricas de que empresas com maiores perspectivas de crescimento tendem a se financiar com ações (Cardoso & Pinheiro, 2020;Frank & Goyal, 2009b;Myers, 1977). Estes resultados estão em linha com os encontrados em outras pesquisas internacionais como (Frank & Goyal, 2009a;Rajan & Zingales, 1995).…”