How Micro-Level Determinants Affect the Capital Structure Choice: Evidence from Bosnia and Herzegovina

MANGAFIĆ, Jasmina and MARTINOVIĆ, Danijela (2015) How Micro-Level Determinants Affect the Capital Structure Choice: Evidence from Bosnia and Herzegovina. Journal of Economic and Social Studies, 5 (2). pp. 181-199. ISSN 1986 – 8502, doi: 10.14706/JECOSS15529

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Abstract

Abstract: The purpose of this study is to examine two leverage ratios using a sample of non-financial companies in Bosnia and Herzegovina (BiH). It was done by taking into account the joint effect of traditional capital structure determinants and managers' personal values and aspirations. We applied hierarchical regression analysis to determine the contribution of profitability indicators, firm size indicators, assets, growth, networking, managerial strategies, managerial psychology, managerial human capital and earnings volatility to explain the variance in capital structure. The results suggest that companies with less experienced owners/managers and higher firm growth have higher financial leverage ratios. In the analysis of the balance sheet leverage, financial proxies of capital structure seem to be significant in explaining capital structure variance. Therefore, companies with lower profitability, a lower level of fixed assets and higher growth opportunities have higher balance sheet leverage ratios. The findings provide better understanding of theoretical perspectives that can best explain how companies choose their capital structure in the transition economy context. Furthermore, empirical findings should help corporate managers to make optimal capital structure decisions.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Divisions: Journal of Economic and Social Studies
Depositing User: Mrs. Emina Mekic
Date Deposited: 19 Oct 2015 14:22
Last Modified: 29 Jan 2016 09:04
URI: http://eprints.ibu.edu.ba/id/eprint/2936

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