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Determinants of Capital Structure: Empirical Study of the Industrial Companies in North Macedonia

Author

Listed:
  • Elena Shkrekova

    (Ss. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje)

  • Aleksandar Naumoski

    (Ss. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje)

Abstract

This study explores the determinants of capital structure within industrial firms in North Macedonia, focusing on a decade-long panel of companies listed on the Macedonian Stock Exchange from 2012 to 2022. Using panel regression analysis, the research examines the impact of key factors—firm size, profitability, asset tangibility, growth, risk, and taxation—on the leverage decisions of these firms. The results reveal that firm size and asset tangibility are positively associated with leverage, indicating these companies’ reliance on debt, especially when supported by substantial physical assets. In contrast, profitability demonstrates a negative relationship with leverage, consistent with the Pecking Order Theory, suggesting that profitable firms in this emerging market prefer internal financing. Growth, measured through sales, shows a positive correlation with leverage, though the impact varies with growth metrics. Overall, this study highlights the unique capital structure dynamics in a transitioning economy and provides valuable insights for financial managers operating in similar markets.

Suggested Citation

  • Elena Shkrekova & Aleksandar Naumoski, 2024. "Determinants of Capital Structure: Empirical Study of the Industrial Companies in North Macedonia," Proceedings of the 5th International Conference "Economic and Business Trends Shaping the Future" 2024 027, Faculty of Economics-Skopje, Ss Cyril and Methodius University in Skopje.
  • Handle: RePEc:aoh:conpro:2024:i:5:p:251-263
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    File URL: https://repository.ukim.mk/bitstream/20.500.12188/31973/1/00027%20Determinants%20of%20Capital%20Structure%20Empirical%20Study%20of%20the%20Industrial%20Companies%20in%20North%20Macedonia.pdf
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    More about this item

    Keywords

    Capital structure; Leverage; Theories of capital structure; Trade-off theory; Pecking order theory;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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