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Capital structure, asset utilization, profitability and growth in the Greek manufacturing sector

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  • F. Voulgaris
  • D. Asteriou
  • G. Agiomirgianakis

Abstract

Greece's accession to the European Union (EU) has affected its economy and its manufacturing sector. Large-size enterprises (LSEs) form a small but vital part of Greek manufacturing and constitute a major component of the country's stock market. According to finance theory, the capital structure of a firm affects its capital cost and market value. This paper, by using dynamic panel data techniques, investigates the determinants of capital structure of LSEs in the Greek manufacturing sector. The findings suggest that asset utilization, gross and net profitability and total assets growth have a significant effect on the capital structure of LSEs. This has straightforward policy implications. Following recent economic developments, Greek firms are exposed to a stronger competition in the EU and global markets, but also to new opportunities. In order to improve their capital structure, Greek manufacturing LSEs need to achieve higher asset utilization and profit margins through economies of scale attained mainly by higher exports. Moreover, governmental measures aiming to support LSEs' efforts should focus their impact on alleviating taxation, reducing bureaucratic burdens, minimizing market imperfections and subsidizing applications of new technology.

Suggested Citation

  • F. Voulgaris & D. Asteriou & G. Agiomirgianakis, 2002. "Capital structure, asset utilization, profitability and growth in the Greek manufacturing sector," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1379-1388.
    • Handle: RePEc:taf:applec:v:34:y:2002:i:11:p:1379-1388
    DOI: 10.1080/00036840110096822
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    2. Asimakopoulos, Ioannis & Athanasoglou, Panayiotis & Siriopoulos, Konstantinos, 2006. "External financing, growth and capital structure," MPRA Paper 16451, University Library of Munich, Germany.
    3. Ramachandran Azhagaiah & Candasamy Gavoury, 2011. "The Impact of Capital Structure on Profitability with Special Reference to IT Industry in India vs. Domestic Products," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 9(4 (Winter), pages 371-392.
    4. Ashvin R. Dave, 2018. "Impact of Financial Management on Profitability: Evidences from Textile Sector of India," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(1), pages 47-52, January.
    5. Yanrui Wu, 2011. "Has Capital been Utilized Efficiently in China?," Chapters, in: Lilai Xu (ed.), China’s Economy in the Post-WTO Environment, chapter 12, Edward Elgar Publishing.
    6. Stavros H. Arvanitis & Irakleia S. Tzigkounaki & Theodoros V. Stamatopoulos & Eleftherios I. Thalassinos, 2012. "Dynamic Approach of Capital Structure of European Shipping Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 5(3), pages 33-63, December.
    7. Thao Nguyen & Min Bai & Greg Hou & Cameron Truong, 2022. "Drought risk and capital structure dynamics," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3397-3439, September.
    8. Suzan Hol & Nico Van der Wijst, 2008. "The financial structure of nonlisted firms," Applied Financial Economics, Taylor & Francis Journals, vol. 18(7), pages 559-568.
    9. Zaher Abdel Fattah Al-Slehat, 2022. "The Effect of Equity Financing Structure and Asset Utilization Efficiency on Financial Fragility," International Business Research, Canadian Center of Science and Education, vol. 15(12), pages 132-132, December.

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