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The influence of capital structure on baltic corporate performance

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  • Julia Bistrova
  • Natalja Lace
  • Valentina Peleckienė

Abstract

Seeking for the optimal capital structure lasts for more than 50 years and still is very topical, especially during the market turmoil as it happened in 2008. No perfect answer is yet provided to the question of how large debt amount should be kept on the accounts. The main objective of the present paper is to analyze the impact of capital structure decisions on the equity performance and on the profitability of the companies located in Baltics. The study covered the time period of 4 years (from 2007 till 2010) and the sample data of 36 “blue-chip” companies listed on the Baltic Stock exchanges. The results of the study discover positive relationship between stock performance and sufficiency of equity capital. Besides, there was found an inverse relationship between the level of debt and capital profitability confirming the pecking order theory that in the best case the company should use self-generated funds.

Suggested Citation

  • Julia Bistrova & Natalja Lace & Valentina Peleckienė, 2011. "The influence of capital structure on baltic corporate performance," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 12(4), pages 655-669, May.
  • Handle: RePEc:taf:jbemgt:v:12:y:2011:i:4:p:655-669
    DOI: 10.3846/16111699.2011.599414
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    References listed on IDEAS

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    1. Drobetz, Wolfgang & Pensa, Pascal, 2007. "Capital Structure and Stock Returns: The European Evidence," Working papers 2007/18, Faculty of Business and Economics - University of Basel.
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    Cited by:

    1. Abu Elnasr E. Sobaih & Amer A. Al-qutaish & Hassane Gharbi & Ahmed E. Abu Elnasr, 2022. "The Impact of Owner-Managers’ Personality Traits on Their Small Hospitality Enterprise Performance in Saudi Arabia," JRFM, MDPI, vol. 15(12), pages 1-17, December.
    2. Dar-Hsin Chen & Chun-Da Chen & Su-Chen Wu, 2014. "VaR and the cross-section of expected stock returns: an emerging market evidence," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(3), pages 441-459, June.
    3. Oino, Isaiah, 2018. "Impact of regulatory capital on European banks financial performance: A review of post global financial crisis," Research in International Business and Finance, Elsevier, vol. 44(C), pages 309-318.
    4. Marzieh Khodavandloo & Zukarnain Zakaria & Annuar Md. Nassir, 2017. "Capital Structure and Firm Performance During Global Financial Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 498-506.
    5. Sheena Chhabra & Ravi Kiran, 2022. "Impact of information on winners' curse and long run performance of initial public offerings," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 975-992, January.
    6. Lailah Fujianti, 2018. "Top Management Characteristics and Company Performance: An Empirical Analysis on Public Companies Listed in the Indonesian Stock Exchange," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 62-76.

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