Capital Structure And Financial Performance Of Agricultural Companies – Evidences From The Macedonian Agricultural Sector In Transition
Asymmetries between the emerging capital and credit market in the Republic of Macedonia in addition to the restructure of the agricultural sector limit the agricultural companies’ financial decisions and their possibilities to profit. Considering capital market imperfections typically for transition economies this paper attempts to identify empirical evidences for structural determinants on Macedonian agricultural companies’ financial performance and to explain the financial strategy of these companies to earn profit. The relationship between the ratio on assets return is used to measure financial performance and structural determinants of capital, earnings and financial business. The relationship is econometrically tested by the specification of a fixed-effect model. Following previous studies relaying on the pecking-order theory and the trade-off theory, the analysis applies on a dynamic panel data consisting of 26 Macedonian agricultural companies originating from the former agrokombinates, during the period 2006-2010. The agricultural companies’ capital structure determinant is tested by the specification of two different models: the first model uses debt-to-equity ratio as a capital structure indicator and the second one uses the debt ratio. Results suggest that Macedonian agricultural companies in the short run are limited by pricing flexibility undertaking different strategies to increase profitability. More efficient strategies are undertaken by growing agricultural companies operating on their fixed assets. However these agricultural companies are confronting with inefficiencies in the use of working capital reducing the ability to supply at an increase market demand. Statistical evidences do not support the hypothesis of that high-levered agricultural companies in Macedonia have higher opportunities to profit. Probably due to asymmetries between the national capital and credit markets and agricultural companies, increasing risk exposure. Hence, Macedonian agricultural companies prefer more assets than debt, considering financial risk in the long run decisions. This strategy seems to be a good financial strategy for growing agricultural companies with the ability to generate sufficient liquidity to meet exogenous market conditions.
|Date of creation:||25 Oct 2012|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Scott, James H, Jr, 1977. "Bankruptcy, Secured Debt, and Optimal Capital Structure," Journal of Finance, American Finance Association, vol. 32(1), pages 1-19, March.
- Stiglitz, Joseph E, 1988. "Why Financial Structure Matters," Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 121-26, Fall.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Eugene Nivorozhkin, 2003. "The dynamics of capital structure in transition economies," Macroeconomics 0303005, EconWPA.
- Kim, E Han, 1978. "A Mean-Variance Theory of Optimal Capital Structure and Corporate Debt Capacity," Journal of Finance, American Finance Association, vol. 33(1), pages 45-63, March.
- Erik Mathijs & Nivelin Noev, 2004.
"Subsistence Farming in Central and Eastern Europe : Empirical Evidence from Albania, Bulgaria, Hungary, and Romania,"
Eastern European Economics,
M.E. Sharpe, Inc., vol. 42(6), pages 72-89, November.
- Erik Mathijs & Nivelin Noev, 2004. "Subsistence Farming in Central and Eastern Europe : Empirical Evidence from Albania, Bulgaria, Hungary, and Romania," Eastern European Economics, Taylor & Francis Journals, vol. 42(6), pages 72-89, November.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
- Baltagi, Badi H. & Bresson, Georges & Pirotte, Alain, 2003. "Fixed effects, random effects or Hausman-Taylor?: A pretest estimator," Economics Letters, Elsevier, vol. 79(3), pages 361-369, June.
- Kraus, Alan & Litzenberger, Robert H, 1973. "A State-Preference Model of Optimal Financial Leverage," Journal of Finance, American Finance Association, vol. 28(4), pages 911-22, September.
- Philippe Gaud & Elion Jani & Martin Hoesli & André Bender, 2005.
"The Capital Structure of Swiss Companies: an Empirical Analysis Using Dynamic Panel Data,"
European Financial Management,
European Financial Management Association, vol. 11(1), pages 51-69.
- Philippe Gaud & Elion Jani & Martin Hoesli & André Bender, 2003. "The capital structure of Swiss companies: an empirical analysis using dynamic panel data," FAME Research Paper Series rp68, International Center for Financial Asset Management and Engineering.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E, 1969.
"A Re-Examination of the Modigliani-Miller Theorem,"
American Economic Review,
American Economic Association, vol. 59(5), pages 784-93, December.
- Majumdar, Sumit K & Chhibber, Pradeep, 1999. "Capital Structure and Performance: Evidence from a Transition Economy on an Aspect of Corporate Governance," Public Choice, Springer, vol. 98(3-4), pages 287-305, March.
- Nivorozhkin, Eugene, 2003. "The dynamics of capital structure in transition economies," BOFIT Discussion Papers 2/2003, Bank of Finland, Institute for Economies in Transition.
- Stiglitz, Joseph E, 1974.
"On the Irrelevance of Corporate Financial Policy,"
American Economic Review,
American Economic Association, vol. 64(6), pages 851-66, December.
- Zinych, Nataliya & Odening, Martin, 2009. "How Costly are (Agricultural) Investments during Economic Transition? A Critical Literature Appraisal," 2009 Conference, August 16-22, 2009, Beijing, China 50319, International Association of Agricultural Economists.
- Aydin Ozkan, 2001. "Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(1-2), pages 175-198.
- Mihaela Dragota & Andreea Semenescu, 2008. "A Dynamic Analysis of Capital Structure Determinants. Empirical Results for Romanian Capital Market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 4(4(521)), pages 65-80, April.
- Fischer, Edwin O & Heinkel, Robert & Zechner, Josef, 1989. " Dynamic Capital Structure Choice: Theory and Tests," Journal of Finance, American Finance Association, vol. 44(1), pages 19-40, March.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Ralph Haas & Marga Peeters, 2006. "The dynamic adjustment towards target capital structures of firms in transition economies ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(1), pages 133-169, 03.
- John R. Graham, 2000. "How Big Are the Tax Benefits of Debt?," Journal of Finance, American Finance Association, vol. 55(5), pages 1901-1941, October.
When requesting a correction, please mention this item's handle: RePEc:ags:eaa132:139501. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.