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The Relationship between Capital Structure and Profita-bility of the Limited Liability Companies

Listed author(s):
  • Jana Steklá

    ()

    (Czech University of Life Sciences Prague)

  • Marta Gryčová

    ()

    (Czech University of Life Sciences Prague)

Registered author(s):

    Capital structure is very important, especially the decision which concern with this problem, because the profitability of a company is directly affected by such decision. The successful choice and use of capital is one of the key components of the enterprises financial strategy. This means that it is the vital to pay attention and proper care capital structure. The aim of this paper is to investigate the relationship between capital structure and profitability of the limited liability companies from an agricultural sector in the Czech Republic over the past six year period from 2008 to 2013. Data was obtained and processed from the database of enterprises of Albertina and was analyzed by using descriptive statistics, i.e. mean, median, variation range, standard deviation, coefficient of variation, skewness, kurtosis, and correlation analysis to find out the association between the variables. The results of this paper describe a small negative correlation between the debt ratios and profitability ratios.

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    File URL: https://doi.org/10.1515/acta-2016-0003
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    Article provided by University of South Bohemia in Ceske Budejovice in its journal Acta Universitatis Bohemiae Meridionales.

    Volume (Year): 18 (2015)
    Issue (Month): 2 ()
    Pages: 29-39

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    Handle: RePEc:boh:actaub:v:18:y:2015:i:2:p:29-39
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    Web page: http://acta.ef.jcu.cz/

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    1. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    2. Joshua Abor, 2005. "The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana," Journal of Risk Finance, Emerald Group Publishing, vol. 6(5), pages 438-445, November.
    3. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    4. Ivo Welch, 2011. "Two Common Problems in Capital Structure Research: The Financial‐Debt‐To‐Asset Ratio and Issuing Activity Versus Leverage Changes," International Review of Finance, International Review of Finance Ltd., vol. 11(1), pages 1-17, March.
    5. Vojislav Maksimovic, 1988. "Capital Structure in Repeated Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 389-407, Autumn.
    6. Michael Faulkender & Rong Wang, 2006. "Corporate Financial Policy and the Value of Cash," Journal of Finance, American Finance Association, vol. 61(4), pages 1957-1990, August.
    7. Brander, James A. & Lewis, Tracy R., 1986. "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, American Economic Association, vol. 76(5), pages 956-970, December.
    8. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    9. Dirk Brounen & Piet M.A. Eichholtz, 2001. "Capital Structure Theory: Evidence from European Property Companies' Capital Offerings," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(4), pages 615-632.
    10. Petersen, Mitchell A & Rajan, Raghuram G, 1994. " The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    11. Taub, Allan J, 1975. "Determinants of the Firm's Capital Structure," The Review of Economics and Statistics, MIT Press, vol. 57(4), pages 410-416, November.
    12. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
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