Determinanty kapitálovej štruktúry a finančného rozhodovania v podmienkach slovenských podnikov
DETERMINANTS OF CAPITAL STRUCTURE AND FINANCIAL DECISION-MAKING IN SLOVAK ENTERPRISES

Summary/Abstract: r more than four decades discussion in corporate finance concerns the question of optimal capital structure: Given a level of total capital necessary for supporting com-pany’s activities, is there a way of dividing this capital into debt and equity which maxi-mizes firm value? And, if so, what are the critical factors in setting the leverage ratio for a given company? Under the assumption of a capital market in which corporate taxation is the single market imperfection Modigliani and Miller show that firms prefer debt financing if inte-rest costs are tax-deductible. Others claim that the actual impact of the deductibility depends on the existence of a crowding-out effect by non-debt tax shield. After Modi-gliani and Miller a line of research emerged in which direct and indirect bankruptcy costs and their influence on the level of leverage were introduced. Theoretical arguments also suggest that the debt-equity ratio is related to agency costs. A vast and rapidly growing literature deals with potential relations between this choice and agency problems. Three well-known predictions prevail. First, leverage ag-gravates agency conflicts between shareholders and bondholders. Frequently cited exam-ples are the direct wealth transfer problem, the asset substitution problem and the under-investment problem. Second, leverage mitigates agency problems that arise from managerial behavior that conflicts with the interest of shareholders. Well-known example is the overinvestment problem. Finally, the relative amount of debt raises the costs of agency problems with stake-holders like customers and employees. In this paper we test agency theories within a framework of capital structure deci-sions. Data and the empirical method allow (1) to distinguish between tax and bankrupt-cy determinants of leverage and agency determinants and (2) to distinguish between de-terminants of leverage and determinants of agency problems. For analysis we use ques-tionnaire data of non-financial firms in Slovakia. By means of a questionnaire we asked financial managers (CFOs) for their opinion about firm characteristics. The knowledge of these managers goes beyond publicly available data and includes internal information, such as the presence of agency problems. The analysis itself uses structural equations modeling with confirmatory analysis. The structural equations model describes the relationships between the variables in the model. Five endogenous variables are leverage and the presence of four agency prob-lems. Each of these five endogenous variables is potentially determined by a wide set of exogenous variables. The main result of the research is that direct relations between leverage and agency problems seem to be absent. This does not imply that the agency problems are irrelevant. Other instruments than leverage affect agency problems. As expected, a positive relation between some exogenous variables and agency problems determinants has been found.

• Details
• Contents