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Sources of Capital Structure: Evidence from Transition Countries

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  • Karin Joeveer

Abstract

This study explores the significance of firm-specific, institutional, and macroeconomic factors in explaining variation in leverage using a sample of firms from nine Eastern European countries. Country-specific factors are the main determinants of variation in leverage for small unlisted companies, while firm-specific factors explain most of the variation in leverage for listed and large unlisted companies. Around half of the variation in leverage related to country factors is explained by known macroeconomic and institutional factors, while the remainder is explained by unmeasurable institutional differences (e.g. law and enforcement). These findings are in line with the results forWestern European countries in Joeveer (2005) and show that country characteristics are not more significant determinants of leverage in these transition economies.

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Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp306.

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Date of creation: Sep 2006
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Handle: RePEc:cer:papers:wp306

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Keywords: Capital structure; Eastern Europe.;

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  1. Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
  2. Laurence Booth, 2001. "Capital Structures in Developing Countries," Journal of Finance, American Finance Association, vol. 56(1), pages 87-130, 02.
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  7. Mariassunta Giannetti, 2000. "Do Better Institutions Mitigate Agency Problems? Evidence from Corporate Finance Choices," Temi di discussione (Economic working papers) 376, Bank of Italy, Economic Research and International Relations Area.
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  9. Nivorozhkin, Eugene, 2005. "Financing choices of firms in EU accession countries," Emerging Markets Review, Elsevier, vol. 6(2), pages 138-169, June.
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Cited by:
  1. Mari Avarmaa & Aaro Hazak & Kadri Männasoo, 2011. "Capital structure formation in multinational and local companies in the Baltic States," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 125-146, July.
  2. Kadri Männasoo, 2007. "Determinants of firm sustainability in Estonia," Bank of Estonia Working Papers 2007-04, Bank of Estonia, revised 08 Mar 2007.
  3. Anastasiya Shamshur, 2009. "Is the Stability of Leverage Ratios Determined by the Stability of the Economy?," CERGE-EI Working Papers wp393, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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