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What managers think of capital structure and how they act: Evidence from Central and Eastern Europe

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  • Péter Hernádi

    (American Appraisal Hungary Ltd., Budapest University of Technology and Economics)

  • Mihály Ormos

    (Budapest University of Technology and Economics)

Abstract

This paper analyzes the capital structure and the choice of financing alternatives across a broad sample of Central and Eastern European companies. Our investigation is built on two methods: the first concentrates on capital structure decisions through quantitive information applying panel regression for the period 2005 - 2008 to allow a closer look at the strenght of the pecking order and static tradeoff theories; and the second extends the analysis with a qualitative questionnaire on the explicit and latent preferences behind financing policy. The same set of randomly selected 498 firms that fairly represent size classes and countries by the weight of their economic performance are investigated. The CFO's answers reflect a pecking order driven behavior; with limited role for the target leverage ratio; this is confirmed by the estimated coefficients of the panel regression.

Suggested Citation

  • Péter Hernádi & Mihály Ormos, 2012. "What managers think of capital structure and how they act: Evidence from Central and Eastern Europe," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(2), pages 47-71, December.
    • Handle: RePEc:bic:journl:v:12:y:2012:i:2:p:47-71
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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2012.10840517
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    3. Petra Růčková & Nicole Škuláňová, 2022. "What Firm-Specific and Macroeconomic Determinants of Financial Structure Affect Transport and Storage Companies from Selected European Countries?," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2022(2), pages 5-32.
    4. Lambert H. de Wet & Sean Joss Gossel, 2016. "South African Capital Structure Decisions: A Survey of Listed Companies," Journal of African Business, Taylor & Francis Journals, vol. 17(2), pages 167-187, May.
    5. Li Li & Zixuan Wang, 2019. "How does capital structure change product-market competitiveness? Evidence from Chinese firms," PLOS ONE, Public Library of Science, vol. 14(2), pages 1-14, February.
    6. Andrzej Cwynar & Wiktor Cwynar & Robert Dankiewicz, 2016. "Studies of firm capital structure determinants in Poland: an integrative review," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 11(4), pages 1-22, March.
    7. Alina ȚARAN, 2019. "Corporate ownership and capital structure: evidence from Romania," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10, pages 133-150, June.
    8. Růčková Petra & Heryán Tomáš, 2015. "The Capital Structure Management in Companies of Selected Business Branches of Building in Conditions of the Czech Republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(6), pages 699-714.

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    More about this item

    Keywords

    capital structure; emerging European countries; static tradeoff theory; pecking order theory;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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