Capital structure in Albanian manufacturing corporationsThe main factors which determine it
Capital structure in Albanian manufacturing corporationsThe main factors which determine it

Summary/Abstract: For every company, decisions made on achieving an optimal capital structure are important for its life cycle and economic profitability. Properly funded investments contribute to the creation of new wealth, which reflects a high added value in the market. A number of theories have been developed by specialists, in the field of finance and economics about the capital structure and its optimal level. In general, these theories came up to conflicting conclusions. One of these theories, developed by Myers and Majluf in 1984, is the “Pecking Order Theory”, which states that companies choose to finance their activity in a certain hierarchical order, preferring domestic financing at first and if it is not possible, they will prefer to be financed through debt, and ultimately through new equity. This paper tends to analyze in which extent this theory of capital structure is applied in the Albanian reality of large manufacturing corporations. Through empirical analysis of the sample, it is analyzed to what extent manufacturing corporations taken in the study, choose to apply this preferential order in decision making between different financing alternatives. Through the inductive method used in the argument, it is concluded that “Pecking Order Theory” is widely applicable to large manufacturing corporations operating in Albania. They prefer domestic and debt financing rather than new equity. Based on the results, in the end are given some recommendations for large corporations, in order to see as an effective way of financing the issuance of new equity, or even debt securities, such as corporate bonds.

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