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Does Capital Structure Drive Profitability in the Energy Sector?

Author

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  • Monika Wieczorek-Kosmala

    (College of Finance, University of Economics in Katowice, 1 Maja 50, 40-287 Katowice, Poland)

  • Joanna Błach

    (College of Finance, University of Economics in Katowice, 1 Maja 50, 40-287 Katowice, Poland)

  • Iwona Gorzeń-Mitka

    (Faculty of Management, Czestochowa University of Technology, J.H. Dąbrowskiego 69, 42-201 Częstochowa, Poland)

Abstract

This paper investigates the factors that determine the profitability of non-listed energy firms from four central European countries: Hungary, Poland, Slovakia, and the Czech Republic. We apply the regression analysis, on a large panel of firm-year observations for the 2015–2019 timespan, to verify the hypothesis on the inversed relationship between leverage and profitability of the companies performing in the energy sector. Our results support the inversed relationship for debt in total and long-term debt, which are consistent with the assumptions of the pecking order theory. However, for short-term debt, we have found a direct relationship, which confirms the assumptions of the trade-off theory of capital structure. Our work contributes to the existing debate on the interplay between financial leverage and profitability, by providing evidence for a large panel of non-listed firms, from a single sector (energy)-oriented perspective.

Suggested Citation

  • Monika Wieczorek-Kosmala & Joanna Błach & Iwona Gorzeń-Mitka, 2021. "Does Capital Structure Drive Profitability in the Energy Sector?," Energies, MDPI, vol. 14(16), pages 1-15, August.
    • Handle: RePEc:gam:jeners:v:14:y:2021:i:16:p:4803-:d:609987
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    Cited by:

    1. Katarzyna Goldmann & Aleksander Zawadzki, 2022. "Financial Sector Analysis of Companies in the Energy Industry Listed on the Warsaw Stock Exchange," Energies, MDPI, vol. 15(22), pages 1-23, November.
    2. Iwona Gorzeń-Mitka & Monika Wieczorek-Kosmala, 2023. "Mapping the Energy Sector from a Risk Management Research Perspective: A Bibliometric and Scientific Approach," Energies, MDPI, vol. 16(4), pages 1-32, February.
    3. Gholamreza Zandi & Raja Rehan & Qazi Muhammad Adnan Hye & Sandy Low Bee Choo, 2023. "Exploring Capital Structure Determinants for OECD Energy Firms," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 338-347, July.
    4. Jaroslav Mazanec, 2023. "Capital Structure and Corporate Performance: An Empirical Analysis from Central Europe," Mathematics, MDPI, vol. 11(9), pages 1-19, April.

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