Capital structure and innovation: a study of Baltic listed companies
Capital structure and innovation: a study of Baltic listed companies

Summary/Abstract: Innovation is the basis for competitiveness, but at the same time, innovation usually requires a large amount of capital and the company might not have the necessary means to finance the innovative projects. The aim of the study is to evaluate the relationship between innovation and capital structure. In the case of 24 Baltic listed consumer goods companies, it was found that innovation increases with the increase in total debt, whereas the increase in debt is associated with decrease in profitability. In the case of Latvian company JSC Grindeks, there is a non-linear relationship between capital structure and innovation. The level of innovation is low at very low and very high levels of debt. For JSC Grindeks, the level of innovation is maximized if the ratio of total debt is approximately 30%.

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