Politická ekonomie
Politická ekonomie
Prague Economic Papers
University of Economics, Prague

Prague Economic Papers Vol. 24 No. 6

The Capital Structure Management in Companies of Selected Business Branches of Building in Conditions of the Czech Republic

DOI: https://doi.org/10.18267/j.pep.515

[full text (PDF)]

Růčková Petra, Heryán Tomáš

Current paper has focused on the capital structure management theories. The theoretical part of the study firstly highlights the diff erences between trade-off theories and pecking order theories. In the empirical part there are then proved some significant relationships between fi nancial indicators (debt/equity ratio and return on equity) of homogenous data sample from the Czech branch of building area. The aim of the study is to prove the differences between the capital structure development that are based on the type of the Czech companies’ ownership in the selected NACE industrial branch and to point out some other particularities. The contribution of the paper is a comparison of the theory as well as practice of this issue in the Czech Republic. For pooled sample there are used selected financial indicators of 57 building companies, all with turnover of more than CZK 1.5 billion. The choice of this criterion was a result of a change in efficiency in Czech economy observed in the selected period. We can assume that this factor will have low influence on the selection of financial resources of large corporations. We may even say that for large companies the availability of financial resources remain unchanged. We have obtained annual data from 2004 to 2011. Due to such short estimation period, but the width of pooled sample on the other hand, it is used generalized method of moments (GMM) panel regression. There are also arguments of motivation to analyse business branch of building specifi cally. Moreover, an analysis is split according to ownership of companies into two categories, for the Czech and foreign owners. Based on the recent literature there has been made and tested three hypotheses. Results of the article have clearly proved the separation of managers from owner’s positions. On the top of that, domestic companies are not pushed to distribute the realized profi t so much as foreign owners that prefer the return of their means invested into business. There is also a suggestion of future interests in research focused on other Czech business branches, too.

Keywords: capital structure, debt/equity ratio, domestic and foreign owners, GMM panel regression, return on equity

JEL Classification: C58, G32


Chen, D., Chen, C., Chen, J., Huang, Y. (2013), “Panel Data Analyses of the Pecking Order Theory and the Market Timing Theory of Capital Structure in Taiwan.” International Review of Economics & Finance, Vol. 27, pp. 1-13.

Databáze Magnusweb, Bisnode Česká republika 2013. [online] [vid.2013-04-18]. Available at: http://www.magnusweb.cz.

Deangelo, H., Masulis, R. W. (1980), “Optimal Capital Structure under Corporate and Personal taxation).” Journal of Financial Economics, Vol. 8, No. 1, 1980, pp. 3–27. [online] [2013-04-18]. Available at: http://ssrn.com/abstract=1482270.

Frank, M. Z., Goyal, V. K. (2003), “Testing the Pecking Order Theory of Capital Structure.” Journal of Financial Economics, Vol. 67, No. 2, pp. 217–248.

Haas, R., Lelyveld, I. (2010), “Internal Capital Markets and Lending by Multinational Bank Subsidiaries.” Journal of Financial Intermediation, Vol. 19, No. 1, pp. 1–25.

Hernadi, P., Ormos, M. (2012), “What Managers Think of Capital Structure and how They Act: Evidence from Central and Eastern Europe.” Baltic Journal of Economics, Vol. 12, No. 2, pp. 47–71.

Jensen, M. C., Meckling, W. H. (1976), “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” In JENSEN, M. C. A Theory of the Firm: Governance, Residual Claims and Organizational Forms, Harvard University Press, December 2000; from Journal of Financial Economics, Vol. 3, No. 4.

Jong, A., Verbeek, M., Verwijmeren, P. (2011), “Firms’ Debt–Equity Decisions when the Static Trade-off Theory and the Pecking Order Theory Disagree.” Journal of Banking & Finance, Vol. 35, No. 5, pp. 1303–1314.

Kislingerová, E. et al. (2004), Manažerské fi nance. Prague: C. H. Beck.

La Bruslerie, H., Latrous, I. (2012), “Ownership Structure and Debt Leverage: Empirical Test of a Trade-off Hypothesis on French Firms.” Journal of Multinational Financial Management, Vol. 22, No. 4, pp. 111–130.

Mackie-Mason, J. (1990), Do Taxes Aff ect Corporate Financing Decisions? In The Journal of Finance, Vol. 45, No. 5, 1990, pp. 1471–1493. [online] [2013-04-18]. Available at: http://www.jstor.org/stable/2328746.

Ministry of Industry and Trade of the Czech Republic. [online] [vid. 2013-04-18]. Available at: http://www.mpo.cz, Financial Analyses of the Ministry of Industry and Trade.

Ministry of Industry and Trade of the Czech Republic. [online] [vid. 2013-04-18] Available at: http://www.mpo.cz, Analýza vývoje ekonomiky ČR a odvětví v působnosti MPO za rok 2010.

Myers, S. C. (1984), “The Capital Structure Puzzle.” Journal of Finance, Vol. 39, No. 3, pp. 575–592. [online] [2013-04-18] Available from: <http://onlinelibrary.wiley.com/ doi/10.1111/j.1540-6261.1984.tb03646.x/full>.

Roubíčková, M., Růčková, P. (2012), Finanční management. I. Ed., Prague: Grada Publishing.

Sabiwalsky, R. (2010), “Nonlinear Modelling of Target Leverage with Latent Determinant Variables – New Evidence on the Trade-off Theory.” Review of Financial Economics, Vol. 19, No. 4, pp. 137–150.

Shyam-Sunder, L., Myers, S. C. (1999), “Testing Static Trade-off against Pecking Order Models of Capital Structure.” Journal of Financial Economics, Vol. 51, No. 2, pp. 219–244.

Titman, S., Wessel, R. (1988), “The Determinants of Capital Structure Choice.” The Journal of Finance, Vol. 43, No. 1, pp. 1–19.