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Studies of firm capital structure determinants in Poland: an integrative review.

Introduction

Capital structure decisions in firms and factors determining them remain among the intriguing issues which deserve more empirical studies, despite almost 30 years of such investigation, mainly in the Anglo-Saxon economies. The history of exploring equity-debt choices in firms operating in Poland is shorter, as its beginning dates from the middle of the 1990s. Despite more than 30 empirical studies aimed at scrutinizing leverage determinants conducted in Poland so far, we lack an all-encompassing meta-analysis which would sum up empirical research to date and draw general conclusions from it. This kind of integrative empirical literature review seems to be needed since as Biatek-Jaworska et al. (2014, p. 8) point out "capital structure determinants and the appropriateness of pecking order, trade-off and maturity matching theories in Polish conditions have not been unambiguously verified and call for deepened research". The process of the economic transformation in Poland, as in other Central and Eastern European countries, was characterized by many market imperfections highlighted by the capital structure theories questioning the leverage irrelevance of the Modigliani & Miller theorem in their perfectly competitive market setting. Thus, these countries form very attractive and exceptionally pertinent objects in studying equity-debt choices.

The article summarizes the empirical studies conducted on capital structure determinants in firms in Poland so far and draws some general conclusions as such summative analysis allows for. The body of evidence gathered in our review can be considered the initial stage of more advanced meta-analysis devoted to the factors that determine the choice between equity and debt in firms. For that reason, the goal of the article is to synthesize the research to date performed in this field in Poland revealing some general patterns concerning capital structure determinants resulting from surveying a large set of studies and thus to validate some empirical observations while questioning others. Our work contributes to the existing knowledge on capital structure selection since the analysis presented in the article attempts to answer the same questions which are typically asked in capital structure determinant works, yet in doing that it refers to a large set of studies. This creates a new perspective and fresh opportunities for future researchers.

The remainder of the paper is organized as follows. In the next section we refer to traditional capital structure theories and their predictions concerning the way some crucial firm-specific factors influence leverage. After that we provide the synthetic presentation of our review. In the background section we give the general view of the transformation of the Polish economy since the 1990s with the emphasis on financial market development, and the way it can be responsible for the potential shifts in the capital structure patterns of firms operating in Poland. The remaining sections show key findings formulated on the basis of our review and regarding country-specific and firm-specific factors determining leverage of firms operating in Poland. Conclusions summarize the most important points.

Literature review

Two dominant capital structure theories are widely recognized in the corporate finance literature: tradeoff theory and pecking order theory. Trade-off theory (hereafter TOT) is based on the premise according to which the ultimate debt-equity choice is based on the comparison of the immanent benefits and costs of debt and equity. The theory grew on the groundbreaking theorem of the Nobel prize laureates, Modigliani and Miller (1958) and predicts that in their debt ratio choices firms will be driven by the marginal analysis aimed at finding the capital mix at which the marginal benefit of the additional euro of debt will equate its marginal cost. The key benefits of debt are associated with the tax shield while the costs can be divided into potential bankruptcy costs and agency costs.

Pecking order theory (henceforth POT) was built on the empirical findings of Donaldson (1961) and developed by Myers and Majluf (1984). It predicts that in their financing decisions firms, in the case of the capital needs, will begin with the internal funds as the first financing resort. When the internal funds are not available or they are insufficient, firms will turn to the financial markets, however external debt will be used before external equity. New stock issues are considered to be the last financing resort, used in the cases in which all other sources have failed. Thus, the theory assumes that firms apply an apparent order when choosing the degree of leverage and the order is explained mostly by the transaction costs and costs of the information asymmetry among a firm's stakeholders.

Even though the theories differ in key points (TOT is static while POT is dynamic; TOT assumes the existence of the optimal capital structure which should be considered the target for firms in making their financing choices while under the POT framework such an optimum is not a focal issue), the current literature on the corporate capital structure points out that these two theoretical lines of thinking should be considered more complementary than competitive strands (De Haas & Peeters, 2006). Such a reconciling approach may mean that neither does tradeoff theory need to be static nor does pecking order theory need to neglect the optimal capital structure.

Both theories point to some internal factors theoretically responsible for debt-equity choices in firms. The most important are size, profitability, growth, risk (expressed in the volatility of the operating performance), asset structure (expressed in the level of the tangibility of assets) and non-debt tax shields. Hypothetically, these firm-specific attributes, along with the external (country-specific and industry-specific) factors should convincingly and to a large degree explain the capital structure patterns observed in firms. Yet, TOT and POT are not consistent as to the way some of the aforementioned firm-specific characteristics influence leverage. They are univocal in case of growth, asset structure and non-debt tax shield. The opinions concerning the way volatility influences leverage are ambiguous, especially under the POT regime. Nivorozhkin (2005) even states that the factor lacks the theoretical predictions concerning its relation to debt ratios. Finally, the theoretical predictions are opposite for profitability and size. Table 1 summarizes the expectations formulated on the basis of TOT and POT, respectively.

The literature dedicated to the way firm-specific factors can influence financing patterns in firms is vast. For that reason we limit our discussion on this issue to the most important arguments.

In the light of TOT, profitability determines the debt tax shield capabilities (with more profitable firms having greater opportunities to make savings on taxes, ceteris paribus). Hence, the theory predicts a positive relationship between profitability and leverage. As distinct from TOT, POT argues that more profitable firms--as opposed to less profitable ones--have greater opportunity to finance themselves internally, without the need of raising capital externally, including debt. Thus, a negative relationship between profitability and leverage is expected by the theory.

Larger firms are less vulnerable to the impact of negative factors emphasized in TOT such as the factors leading to financial distress and associated with potential bankruptcy. This leads to the expectation of a positive relationship between size and leverage. Conversely, POT predicts a negative link between these two. The rationale underlying the expectation is that larger firms are more transparent and experience lower information asymmetry costs. Thus, they are more inclined to issue more equity. Moreover, larger firms are--on average--older, more mature and hence they identify relatively few growth opportunities which leads to the anticipation of sizable financial surpluses and retained earnings.

Operating performance volatility reflects riskiness and belongs to the key determinants of the firm's ability to cover the obligations imposed by debt. Firms with more volatile profits are considered to be more prone to financial distress and therefore they should be more debt restrained. Such arguments lead to the presumption of a negative relationship between volatility and leverage within a TOT setting. Some authors claim that the same rationale is valid for POT. For example, Mateev et al. (2013, p. 9) point out that "For the pecking order theory, firms with more volatile cash flows are less likely to have debt in order to lower the possibility that they will have to issue new risky securities or forego future profitable investments when cash flows are low". The opposite opinion is expressed by De Haas and Peeters (2006). Yet, Kedzior (2012) notes that the majority of authors predict the negative dependence of leverage on volatility. Given the fact that there is apparent incongruity in formulating the theoretical expectations concerning the way volatility affects leverage, we decided to mark the attribute by "N/P" in Table 1.

From the point of view of TOT fast growth imposes the additional threat of instability which reflects business riskiness. Because riskier business ventures should be more cautious in borrowing funds, one should expect a negative relationship between growth and leverage. Additionally, in contrast to the part of the firm value which is represented by the assets in place (tangible assets), the other part--reflected in the future growth opportunities can't be used as the collateral to pledge for the borrowing. Also POT predicts a negative association between these two financial variables, yet it is justified in a different way. The theory argues that rapid growth and high growth opportunities can exacerbate the agency problems of debt (with shareholders having greater incentives to invest sub-optimally and expropriate the wealth from lenders), thus leading to a lower inclination of banks and potential bondholders to lend capital to such firms.

According to TOT the share of tangible assets in the balance sheet determines potential bankruptcy costs since they can be used as collateral and can be easily liquidated in the case of the default. Consequently, the factor should be positively linked to leverage (more tangible assets leading to higher debt ratios, ceteris paribus). The same sign of the relationship is expected by POT, yet for somewhat different reasons. On the basis of POT one can claim that tangibility of assets can serve as the "sorting factor" (Weill, 2002) which allows lenders to distinguish good businesses from poor ones and thus mitigating the asymmetry information between firms and their creditors. This way tangibility can help to control such undesirable aspects of business activity as negative selection (difficulty of lenders to identify credible borrowers) and moral hazard (managers trying to increase their wealth at the cost of lenders).

A non-debt tax shield serves as the substitute for a debt tax shield--a prime capital structure determinant in a TOT framework--and as such it can give the same results. Accordingly, a negative relation between the non debt tax shield and leverage is predicted by the theory because firms which are able to save funds through a non-debt tax shield don't have to engage debt to get the same result. Assuming that the adequate proxy for a non-debt tax shield is depreciation which represents self-financing, in the light of POT firms exhibiting high depreciation expenses in relation to total assets should be considered to be less inclined to borrow funds because of their ability to finance themselves internally. As a result, a negative relation between a non-debt tax shield and leverage is also expected in POT.

General view of the survey

We reviewed 34 scientific papers containing an empirical study devoted to capital structure determinants in Poland. As an aggregate, they cover financial performance of firms operating in Poland from 1991 to 2012. This way one can reasonably assume that they illustrate almost the entire history of the market economy in Poland, starting with the transformation of the political system. The survey includes only those studies which were aimed at investigating selected microeconomic (firm-specific or industry-specific) and macroeconomic (country-specific) factors theoretically affecting the equity-debt choice. We ignored other capital decisions-oriented studies (e.g. numerous articles dedicated to comparative analysis of financing in the form of bank loans and leasing, modern financing instruments etc.). The majority of the studies included in our review represent quantitative analyses, typically utilizing the regression procedure of a sort (usually panel regression models). However, some investigated the capital structure determinants in a qualitative way (e.g. Hernadi & Ormos, 2012b; Chojnacka, 2012; Predkiewicz & Predkiewicz, 2014). These are of special value since they ensure additional insight, unavailable in quantitative exploration. The studies collected by the authors can be divided into two sub-sets important for further integrative and summative analysis: those in which Poland was examined separately (which means that it was the only country studied or it was studied along with other countries constituting a region, yet the results were provided not only for the entire region but also independently for Poland) and those in which individual results for Poland were not available, yet they were included in the overall results for a region consisting of Poland and other countries. For obvious reasons the first sub-set was more valuable from the point of view of the analytical goals assumed in our survey. The research we surveyed differs also in the sample of firms that were studied. Some authors relied on the companies listed on the Warsaw Stock Exchange while others used financial data for cross-section of small & medium or small, medium & large firms (listed and non-listed). The details are given in Table 2. This may imply some interpretation challenges as the theoretical predictions concerning the influence of chosen country-specific and firm-specific factors on leverage are different for smaller and larger businesses, at least according to some authors. For example, information asymmetry--having critical status in pecking order theory--is more severe in small firms than in larger ones. On the other hand, many small firms have limited debt-related tax shield opportunities highlighted in trade-off theory--because of the selection of some simplified tax settlements (such as flat rate tax). Thus, in some size-groups of firms pecking order theory or trade-off theory may gain significantly less empirical support than in others.

Even though the results obtained by the authors of the studies included in our survey are somewhat mixed, they are consistent to a large degree. This remaining inconsistency can be explained not only by methodological diversity--different regression models, data time frames and sample of firms employed in respective studies--but also by the dependent and independent variables selected by the researchers. The detailed information concerning the variables investigated in the studies covered by our survey is given in Table 2. Generally, the studies consider a shorter or longer list of traditional factors (attributes) potentially influencing leverage which are promoted by TOT and POT although the proxies of those attributes estimated by various researchers are sometimes diverse. They also adapt wide (total liabilities) or narrow (total debt, excluding trade credit etc.) measures of leverage as the dependent variable. In many cases the analyses are also conducted for short- and long-term leverage ratios, respectively.

Survey results: background

The Polish economy has evolved remarkably since the beginning of the 1990s. The evolution must be accounted for in the integrative review in which the time factor can play an important role. The system and economic reforms introduced in 1990 were followed by significant transformation in the banking sector and the introduction of the stock exchange in 1991. It seems rational that in such a rapidly shifting system at the initial stage of its transformation towards a market economy one must expect financial patterns different from those observed in well-developed countries. Early studies of capital structure decisions carried out in Poland (Campbell & Jerzemowska, 2001; Cornelli et al., 1998; Hussain & Nivorozhkin, 1997) report low or very low debt ratios which is in line with the underdeveloped financial market and borrowing barriers resulting from it. Later studies which covered the second half of the 1990s found leverage still lower than in developed countries, yet to a much lesser degree. For example, De Haas and Peeters (2006) notice divergent results for the smallest and largest firms: the first have gradually become slightly underleveraged while the latter have become less underleveraged during the research period (1993-2001). On average, firms in the CEE region approached their optimal capital structures during the period, however severe asymmetry information between firms and banks still existed at the end of the period resulting in preferring retained earnings by firms and slow adaptation to their target capital structures. By contrast, Nivorozhkin (2005) noted that firms in Poland and other countries examined in his study have been adjusting their capital structures at a similar rate as among Western firms. Shamshur (2010) showed that the pace at which Central and Eastern European (hereafter CEE) firms adapt their capital structures to the targets depends on the financial constraints they face (less constrained firms being able to adapt their capital structures faster). Relatively low debt ratios of firms in CEE countries are also reported by Joeveer (2006). In turn, Delcoure (2007) points out that leverage in Poland was only slightly lower than in the USA and a bit more lower than in G7 countries. Moreover, in comparison to Poland other CEE countries she investigated (Czech Republic, Slovakia and Russia) showed lower debt ratios. Similar results are reported by Nivorozhkin (2005). Basically, these relations between West and East European countries in the 1990s were confirmed by other researchers (e.g. Hall et al., 2006). What is of special importance in the findings of Delcoure (2007) is the small meaning of long-term debt, at least in comparison to developed countries. To explain the phenomenon, Delcoure (p. 11) refers to a small, weak and immature bond market as well as to the fact that "Short-term financing, with its lower default risk, enables creditors to monitor managers more effectively". Even the most recent studies state that debt ratios in CEE countries, including Poland, are still lower than in the developed economies of Western Europe (see for example Kedzior, 2012) and explain the differences by "less financial constraints, consequently higher credit availability, less agency and bankruptcy risks" in the West (Mokhova & Zinecker, 2013b, p. 2538).

Even 10 years after the start of the reforms the Polish economy was still exhibiting substantial distance to the most developed European states. Delcoure (2007) describes the condition of the Polish economy at the turn of 21st century by pointing out such properties as inefficient corporate governance, an underdeveloped bond market and an incomplete institutional structure and legal system governing the banking industry. Ciotek and Koralun-Bereznicka (2014) notice that despite the advanced economic harmonization in the European Union their empirical investigation (data covering years 20002009) suggests that the most powerful factor determining capital structures of firms in Europe is the country in which they operate. This implicitly proves some institutional differences between West and East European countries being still present. Shamshur (2010) confirms that in the middle of the first decade of the 21st c. firms in CEE were still indicating capital constraints: even though the access to funds became easier after becoming EU members, they have still been experiencing barriers in raising external capital. The subprime crisis only exacerbated those limitations. For example, Biatek-Jaworska et al. (2014) report that the negative impact of crisis on the access to debt was observed in all studied classes of firms.

These descriptive statistics concerning leverage demonstrated in the empirical research carried out in Poland are in line with the international findings of other authors, including the renowned studies of DemirgugKunt and Maksimovic (1996 and 1999) who showed that the leverage differences between developed and developing countries (including transition economies) can be explained by country-specific factors such as the degree of the financial market development, especially with reference to the differences in long-term indebtedness. They confirmed that in transition economies debt ratios may be low and increase in tendency, along with the progress in the financial market development.

Hence, it seems that for capital structure decisions the critical feature of the Polish economy under the system transition regime was the underdevelopment of the financial market. It was manifested both in slow growth of the bond market and more or less credit rationing conditions imposed by commercial banks being restrained in granting loans to firms, especially at the initial stage of the transition process. It is symptomatic that even today many firms--maybe the majority of them - do not have alternatives for banking credit to cover their financial needs. Weill (2002) rightfully points out that even in the most capital market-oriented European economies, such as in Great Britain, corporate bonds are utilized at most moderately. He argues that consequently the discussion on capital structure selection must reject the belief according to which managers have freedom in choosing between retained earnings, new issues of stock or bonds, and loans from commercial banks. Instead, it must take into account the fact that in many firms the freedom of choice is unavailable and in a way they are forced to borrow money from banks.

In the 1990s, and especially at the beginning of the period, Poland as a transition economy had some characteristics critically important for the corporate capital selection process and hence for the empirical verification of TOT vs. POT. They refer to some of the traditional capital structure determinants and are widely discussed in the respective literature (Cornelli et al., 1998; Campbell & Jerzemowska, 2001; Hussain & Nivorozhkin, 1997). They are as follows:

1) high potential tax savings (because transition economies exhibit relatively high tax rates),

2) low potential bankruptcy costs (because of an underdeveloped legal system and weak protection of the lenders along with limited institutional backup for those who have the claims to bad debts),

3) high costs resulting from the information asymmetry and associated with negative selection and moral hazard (because of banks being unable to assess the financial strength of the potential borrowers effectively).

Those properties justify the expectation of high leverage which is in contradiction to the empirical findings cited above. Thus, the evident discrepancy between theoretical predictions and empirical findings was evidenced for the early years of the economic transformation in Poland, at least according to the descriptive data concerning debt ratios. This led some authors to assert that the capital structure patterns in transition economies may differ significantly from those observed in the developed countries which can decrease the explanatory power of the classic capital structure theories in expounding the equity-debt choices in countries with rapidly transforming economies (e.g. Delcoure, 2007). Generally, the divergence of the empirical results from the theoretical expectations is justified by the supply-side factors of the market for debt. For example, Cornelli et al. (1998) notice that the properties of the economic system at the initial stage of its transformation resulted in commercial banks being reluctant to finance firms to larger degree because of both high inflation and the inability of firms to exhibit a proven track record in the new system. Moreover, high rates of return on the governmental securities made banks more inclined to lend funds to the government than to firms. Campbell and Jerzemowska (2001) plausibly purport that those financial market-related factors inhibited firms from achieving the optimal capital structures.

These observations may be critical for the ultimate conclusions in the discussion concerning the relative support gained in the empirical research by trade-off theory and pecking order theory, respectively. POT is heavily based on the asymmetry of information and transaction costs which are closely related to the financial market development (i.e. country-specific factors may play a crucial role in the light of the theory). Thus, in a POT setting capital structure choices may be driven more by supply-side factors than demand-side factors. In contrast, firm-specific factors are emphasized in TOT which corresponds with the belief that the equity-debt choices are driven by the internal characteristics (demand-side factors) of the businesses. An underdeveloped capital market and credit rationing manifested by the banking sector during the transition process in Poland leave no doubt as to the fact that supply-side factors had a dominant significance in the empirical studies included in our survey.

Country-specific & industry-specific factors

The theoretical and empirical literature assert that the capital structure in firms can be determined by firm-specific, industry-specific and country-specific factors. Firm-specific factors represent internal attributes of firms being more or less under managerial control (e.g. profitability, size, growth). Industry-specific factors reflect immanent properties of the industry the firm operates in (competition profile, technological characteristics, mechanisms of agency conflicts control). Finally, country-specific factors relate to the specificity of the country in which the firm places its activity. They can be divided into macroeconomic (such as GDP growth or inflation rate) and institutional (such as legal system development and country governance structure) aspects. Since they refer to the most broad perspective, we start the analysis of the empirical findings gathered in our review with them.

The importance of the factors related to country for capital structure choices can be investigated in two ways. One possible approach is to look at the differences in the degree to which selected firm-specific factors explain leverage among countries. The research in which the capital structure choices are not fully explained by the firm-specific attributes suggests that other factors--industry- and country-specific--are at play (see for example Hall et al., 2006 in our review). Likewise, the research in which differences in the explanatory patterns of the firm-specific factors are observed between firms coming from two countries or groups of countries (developed vs. developing economies) must lead to the conclusion certifying that the industry-/country-specific factors are responsible for the perceived differences. The other way is to build the industry factor directly into the regression model.

Cross-country comparisons of factors determining leverage were initiated by Rajan and Zingales (1995), and continued by Graham and Harvey (2002), Bancel and Mitoo (2002), Brounen et al. (2004), Booth et al. (2001) and de Jong et al. (2008), just to mention a few. Generally, they show that despite the same array of factors found to be significant in explaining leverage in various countries, important differences exist. For example, de Jong et al. (2008) found that the firm-specific factors which are critical for explaining capital structure choices in developing countries are not the same as in the developed ones. Similarly, Booth et al. (2001) demonstrated that there are some differences between capital structure selection patterns between developed and developing countries which can be explained by the country-specific factors. Some authors (e.g. Kirch et al., 2012) think that such studies--employing solely listed companies data--provide limited justification for robust conclusions since publicly-held firms are often large and financed by the funds coming from the international markets which obscures the country-specificity aspect.

The empirical studies included in our survey have a similar overtone. For example, Weill (2002, p. 19) in his comparative analysis of Western (France and UK) and Eastern (Poland and Czech Republic) countries states that "determinants of leverage suggested by theory and empirical literature do not obtain clear support in transition economies", arguing that it can be resultant of the commercial banks' behavior and their situation under the conditions of the communist legacy. In turn, Nivorozhkin (2005) states that the capital structure determinants in developed and developing countries appear to be very similar. Kirch et al. (2012) note that even though country-specific factors are robust in explaining capital structures in CEE countries, their additional explanatory power is rather low. They conclude that as the result of the obtained numbers--firm-specific characteristics are critical for capital structure selection.

The comparison of the importance of the countryspecific and firm-specific factors in explaining debt ratios seems to be one of the most intriguing issues in our review. Various researchers obtained mixed results in respect of this question. As opposed to Kirch et al. (2012), Kedzior (2012) found non-firm-specific factors to be the most relevant in determining debt ratios within the entire sample of investigated firms from CEE countries. Interestingly, the industry factor occurred to be the most significant one (it was followed by GDP growth, inflation and profitability). Joeveer (2006), who applied not only regression procedure but also the analysis of variance (ANNOVA), showed that the relative significance of country-specific and firm-specific factors in CEE countries (including Poland) depends on the firm profile. Therefore, she evidenced the key role of country-specific factors in explaining leverage variance in small unlisted firms as opposed to large listed firms for which she proved firm-specific factors to be critical. Also Ciotek and KoralunBereznicka (2014) show that country-specific factors have greater impact on leverage in small firms in comparison to larger ones. These observations are in accordance with the claims of Kirch et al. (2012) suggesting that the firm profile (large vs. SME/listed vs. unlisted) may play a pivotal role in the degree to which country-specific factors affect leverage. This is also in line with the theoretical predictions which assume that privately, non-listed firms and especially small firms experience relatively high asymmetry of information and credit rationing problems, thus being more subject to country effects, such as those associated with the development of the financial market. Interestingly, the same results were obtained by Joeveer (2006) for developed countries. Shamshur (2010) examined the relative significance of country- and firm-specific factors in a different setting. She studied them separately for financially constrained and unconstrained firms operating in Poland and other CEE countries. Her study showed that the restrictions in the access to funds can importantly affect the financing patterns and result in different key factors determining them in constrained (tangibility and size) and unconstrained (GDP and inflation) firms.

Firm-specific factors

The detailed analysis of the results obtained in the research covered by our survey led us to some general and interesting findings concerning the firm-specific characteristics determining capital structures of the investigated firms. They were grouped into three points: (1) the importance of the time factor, (2) the empirical support for trade-off and pecking order theory, and (3) the existence of the optimal capital structure.

The importance of the time factor

Many observations concerning the firm-specific factors theoretically affecting leverage--made by the authors of the studies included in our review--seem to be long-lasting despite the huge differences between the economic environment today and twenty years ago. The general finding is that little has changed in the way traditional firm-specific attributes influence the equity-debt choice in Poland since the early years of the 1990s, at least as to the signs of the essential relationships. In almost all studies scrutinized by us--both, early and late--size belongs to the most significant firm-specific capital structure determinants and is positively related to leverage. The sign of the relationship supports tradeoff theory. On the other hand, leverage turned out to be a negative function of profitability--another critically significant factor in Poland--in almost all studies, which supports pecking order theory. Growth, which was reported to be less often statistically significant than size and profitability, was also found to be positively tied to leverage in almost all studies. Volatility (risk) belongs to the factors tested in smaller number of studies than size, profitability and growth. Moreover, many times in those studies in which it was included, it showed insignificance or gave mixed results. This is consistent with the findings achieved in the studies conducted in Western countries (see Nivorozhkin, 2005, p. 155 for a brief discussion). Inconclusive results are also typical for non-debt tax shield. The only one firm-specific attribute for which we were able to find the evidence that the sign of its relationship with leverage has switched since the early studies is the asset structure expressed in the ratio of tangible assets (more or less broadly defined) to total assets. The authors of the early studies (Cornelli et al., 1998; Hussain & Nivorozhkin, 1997; Weill, 2004) reported that this factor had negative impact on leverage. Nevertheless, later studies bring more mixed results, while the most current ones (e.g. Kedzior, 2012) report that debt ratios are positively dependent on tangibility. This can be interpreted as the manifestation of the maturation process which leads the Polish economy to become more conforming to the economies of developed countries for which the aforementioned positive of tangibility has on leverage is typical, which was confirmed in many empirical studies. In the economies being at the initial stages of the transition process--as in Poland at the beginning of the 1990s--a negative link between tangibility and leverage can be a part of the natural order. Cornelli et al. (1998) point out that in the post-Soviet bloc states fixed assets were perceived as having relatively low prospects (in terms of the future cash flow implied by them) due to their low quality, thus offering low collateral value. Nivorozhkin (2005), who found tangibility to be statistically insignificant in Poland, states that "although tangible assets remain a poor source of collateral in less advanced transition economies, the effect on tangibility on target leverage is moving towards the positive relationship observed in Germany, France, Italy and the UK" (p. 155). The importance of the time factor was observed by Hernadi and Ormos (2012a and 2012b), however for aggregated CEE data. They noticed that traditional firm-specific variables gain in their significance with the passage of time, while country-specific factors become less important. This may imply that CEE countries, including Poland, converge to more developed countries. This is also in line with the empirical findings of Mokhova and Zinecker (2013b) who found evident differences between the old and new EU members in the strength of the associations concerning leverage and traditional firm-specific attributes such as size, profitability, growth etc. Closing the gap, as evidenced by Hernadi and Ormos, can be interpreted a manifestation of the convergence regarding the East and West of Europe.

Interestingly, the explanation of the aforementioned way profitability affects debt ratios in almost all empirical studies conducted in Poland may not be the same in relation to early and late (more current) studies. During the last twenty years Poland has experienced substantial progress in reducing information asymmetry, among many other essential transformations. The time series investigated in the early studies represent the initial stage of development not only in the financial markets, but also in such fields as the legal system and the general institutional environment surrounding businesses. The resultant was--apart from other issues--severe information asymmetry, critical in explaining the pecking order while raising capital. Cornelli et al. (1998) point out that the particular economic terms eventuated in credit rationing, i.e. commercial banks' reluctance to grant loans because of difficulties with distinguishing good enterprises from poor. Funds were available in banks only for those who were prepared to pay high interest rates reflecting increased risk, inflated by the informational asymmetry. Thus, profitable firms with retained earnings had strong incentives to finance their capital needs internally without tapping the capital from the market. Such financial behavior is in line with pecking order theory. Subsequent years brought improvements in the field of information asymmetry in Poland which was driven by the proceeding, yet gradual maturation of the Polish economy. As mentioned above, the information asymmetry--still noticeable at the turn of the 21st c. (De Haas & Peeters, 2006)--can shed additional light on the negative relationship between profitability and leverage. In the middle of the first decade of 21st c.--i.e. in an importantly different economic setting--Harmol and Sieczko (2006) argued that the negative relationship between profitability and leverage results from the fact that in the transition economies managers intend to ensure their firm's stability in the first place, hence refraining from the utilization of debt and financing themselves internally if they can afford it. Mazur (2007) adds that the sign of the relationship can also be explained--at least partly--by the relatively high cost of external capital in the early years of the 21st c. Financing constraints, still existing in the business environment in Poland, can be considered an additional factor justifying the relationship. It should be noted that the negative dependency of leverage on profitability, observed in Poland and contrary to the theoretical predictions of trade-off theory, was empirically confirmed by the majority of foreign studies, including those in the most developed countries.

The empirical support for trade-off and pecking order theory

Our review indicates that the empirical results gathered in Poland are generally similar to those obtained in other countries, including Western Europe and the USA. Relationships evidenced by our survey are basically convergent with the conclusions made by Harris and Raviv (1991) in their renowned review. They summarized it by stating that "leverage increases with fixed assets, non-debt tax shields, investment opportunities, and firm size and decreases with volatility, advertising expenditures, research and development expenditures, bankruptcy probability, profitability and uniqueness of the product" (p. 334). Our review suggests that the empirical status of profitability, size and growth is the same as in the review of Harris and Raviv. Non-debt tax shield was generally found to be insignificant in the majority of studies we surveyed. Even though such empirical results do not allow for decisive statements concerning the acceptance or rejection of pecking order or trade-off theory, they show stronger support for the first which is in line with the results collected not only in other CEE countries, but also in older members of the European Union (Mokhova & Zinecker, 2013b). Hamrol and Sieczko (2006) point out that although pecking order theory explains the behavior of investigated firms better than other theories, it doesn't explain it fully. In the study focused on the early stage of Polish financial market development Delcoure (2007) noted a kind of a "modified pecking order" (retained earnings were followed by external equity; the last resort was debt). Also qualitative research gives stronger support for pecking order theory. For example Hernadi and Ormos (2012b) argue that trade-off theory is more powerful in those firms which strive for holding fixed target leverage. Interestingly, they also notice that the empirical body of evidence doesn't prove that these two theories should be considered to be mutually exclusive. This is in line with the arguments of De Haas and Peeters (2006) who assert that they can effectively coexist on the theoretical ground and complement themselves in explaining the empirical findings. In their opinion trade-off motives seem to be more important for long-term financial decisions while short-term choices gain priority in a pecking order setting.

Those findings are consistent with the conclusions we have formulated in the background section. Assuming that during the period covered by the studies included in our review the Polish economy was characterized by its still developing capital market, higher or lower financing constraints and information asymmetry terms--especially in the part of the research projects which were focused on small & medium-sized private firms--one should not expect strong support for trade-off theory. The costs of the capital structure adaptation to the assumed target are exceptionally high under such conditions.

The existence of the optimal capital structure

The relevance of the optimal capital structure can be empirically inferred directly or indirectly. Revealing the empirical support for trade-off or pecking order theory allows for further, indirect conclusions as to the optimal capital structure. From the theoretical point of view it seems to be irrelevant within a pecking order setting while it plays a focal role in a trade-off approach. Hence, the results obtained in studies included in our survey can be considered an indirect evidence showing the limited role of the optimal capital structure. This kind of inference led some researchers to look for the rationale behind the observed patterns. For example Campbell and Jerzemowska (2001) argued that the investigated firms refrain from reaching the capital targets at the beginning of the 1990s because of the properties of the Polish economy and especially its financial sector. This resulted in a kind of a paradox: despite characteristics allowing them beneficial higher indebtedness, they withheld themselves from borrowing. Instead of behaving as predicted by trade-off theory, they were rather following the pecking order. Other studies (e.g. Szudejko, 2013) provide support for the thesis according to which capital structure choices are driven primarily by the managerial inclination to mimic capital structures of other firms from the same industry. Little was done in the field of testing the capital structure drivers in Poland in a qualitative way. Hernadi and Ormos (2012b), who received a valuable insight due to the opinions gathered through a questionnaire, reported that % of the firm-respondents did not have the optimal capital structure. However, they also point out that the scale of the optimal capital structure adoption in Polish firms was larger than in other investigated countries (38% in Poland and only 14% in Czech Republic which exhibited the lowest level of the optimal capital structure acceptance).

Conclusions

Financing patterns of firms operating in Poland changed substantially since the early years of the 1990s along with the development of the Polish financial market. The evolution, accompanied by other positive shifts in the economy (e.g. improvements in the governance structure and legal system), resulted in reducing the costs of information asymmetry and ultimately in higher leverage of firms. The empirical findings we reviewed confirm that they approached their target capital structures, increased debt ratios to the levels close to West European standards, and proved to be the subject of generally the same--or at least similar--patterns concerning the way various factors determine the debt-equity choice. However, some differences between Poland and more developed countries are still visible with reference to capital structure decisions. Firms operating in Poland rely on long-term debt to a lesser extent than firms in more developed countries which can be explained by a still-existing development gap concerning the financial market. As the result of that one must expect--on average--somewhat greater barriers in access to capital and the information asymmetry costs experienced by Polish firms in comparison to their Western counterparts. This can explain some differences in capital structure decisions between Poland and more developed states.

The aforementioned development in the institutional sphere, primarily the evolution of the financial market, resulted in the perceived decreasing role of the country-specific factors and increasing significance of the firm-specific factors which proves the progressive convergence between Poland and more developed countries. Yet, the country-specific factors are still key in explaining the leverage of small, privately-held businesses. Such firms are more heavily affected by information asymmetry and credit rationing problems and consequently more prone to the supply-side factors of the market for debt.

The observed relationships between leverage and the most important firm-specific factors promoted by the traditional capital structure theories are very similar to those noticed in the research conducted in more developed countries, both for the early and late years of the investigated period. Accordingly, POT gained greater support in comparison to TOT. However, in Poland the specificity of the institutional environment implied by the transition process may play the dominant role in justifying the prevalence of POT. As in the Western studies, size and profitability belong to the most important internal attributes influencing leverage in Poland. Also the signs of the relationships are the same as in the majority of the foreign studies (with leverage being a positive function of size and negative function of profitability). Moreover, the way growth, volatility and tangibility relate to debt ratios was also found to be similar as in the Western studies. Among the factors asset structure (tangibility) deserves special attention as it reflects the shifting nature of the business environment in Poland. Even though the results concerning tangibility are mixed (which is also typical for studies carried out in other countries), a regularity--though weak--can be noticed. In the early studies leverage was negatively dependent on tangibility while in part of the late studies it became positive and dominant in the majority of investigations conducted in the USA and West Europe.

Finally, the superiority of POT in explaining the capital structure choices in Poland suggests at most moderate significance of the target (optimum) capital structure in making the financing choices in firms operating in Poland. However, some studies suggest that the optimal capital structure is more important in Poland than in other CEE countries. Eventually, the investigation of the target capital mix relevance under a more holistic approach in which POT and TOT are considered to be complementary lines of thinking is needed.

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Received: 11.09.2015

Accepted: 10.12.2015

Andrzej Cwynar (1), Wiktor Cwynar (2), Robert Dankiewicz (3)

(1) University of Economics and Innovation in Lublin, andrzej.cwynar@wsei.lublin.pl.

(2) University of Economics and Innovation in Lublin, wiktor.cwynar@wsei.lublin.pl.

(3) Rzeszow University of Technology, rdankiew@prz.edu.pl.
Table 1: Main firm-specific capital structure
determinants--theoretical predictions: TOT vs. POT

ATTRIBUTE                         TOT     POT

Profitability                      P       N
Size                               P       N
Risk (volatility)                  N      N/P
Growth / growth opportunities      N       N
Asset structure (tangibility)      P       P
Non-debt tax shield                N       N

Marks: P--positive association with leverage;
N--negative association with leverage

Source: Own work

Table 2: Studies of the firm-specific factors determining
capital structure in firms operating in Poland included
in our survey

AUTHORS            YEAR OF       SAMPLE
                   PUBLICATION   (OR NUMBER OF
                                 OBSERVATIONS WHEN
                                 SAMPLE IS NOT INDICATED)

Q. Hussain,        1997          17 listed companies
E. Nivorozhkin

F. Cornelli,       1998          Small, medium and
R. Portes,                       large-sized firms for
M. Schaffer                      Poland and medium
                                 and large-sized firms for
                                 Hungary

A. Devic,          2001          38 listed companies
B. Krstic                        (Poland--18,
                                 Hungary--20)

M. Jerzemowska,    2001          65 listed companies
K. Campbell

J. Gajdka          2002          Two samples: 106 and
                                 48 listed companies,
                                 respectively

L. Klapper,        2002          97 107 SME
V. Sarria-
Allende,
V. Sulla

A. Skowronski      2002          78 listed companies

L. Weill           2002          1820 manufacturing
                                 firms

P. Bauer           2004          305 listed companies

L. Weill           2004          4496 manufacturing
                                 firms

W. Frackowiak      2005          1955 (pooling model)
et al.                           and 1921 (fixed effects
                                 model) listed companies

E. Nivorozhkin     2005          5712 firms (including
                                 1219 firms operating in
                                 Poland)

R. De Haas,        2006          The number is not
M. Peeters                       indicated. Not only large
                                 listed companies but
                                 also SME.

G. Hall,           2006          93 266 SME
P. Hutchinson,
N. Michaelas

M. Hamrol,         2006          134 listed companies
J. Sieczko

K. Joeveer         2006          The number is not
                                 indicated. Not only large
                                 listed companies but
                                 also SME.

N. Delcoure        2007          The largest listed com-
                                 panies

K. Mazur           2007          238 companies listed on
                                 Warsaw Stock Exchange

A. Shamshur        2010          51 621 observations
                                 over the period 1996-
                                 2006

Z. Wilimowska,     2010          8 firms representing
M. Wilimowski                    automotive industry

E. Chojnacka       2012          90 listed companies

P. Hernadi,        2012          498 firms
M. Ormos

M. Kedzior         2012          1063 listed manufactu-
                                 ring companies

G. Kirch,          2012          13 070 SME
C. Mateus,
P. Soares Terra

J. Jedrzejczak-    2013          Not indicated (the
Gas                              analyses were not based
                                 on firm-level data; SME
                                 aggregated data sets
                                 were used)

M. Mateev,         2013          3175 SME
P. Poutziouris,
K. Ivanov

C. Mateus,         2013          686 firms
P. Terra

N. Mokhova,        2013          369 listed companies
M. Zinecker

N. Mokhova,        2013          Manufacturing firms
M. Zinecker

M. Szudejko        2013          126 listed companies

A. Biatek-         2014          The number is not
Jaworska,                        indicated; large sample
A. Dzik,                         of small, medium and
N. Nehrebecka                    large firms

D. Ciotek,         2014          Not indicated (the
J. Koralun-                      analyses were not based
Bereznicka                       on firm-level data; ag-
                                 gregated data sets were
                                 used)

P. Hernadi,        2014          26 868 SME
M. Ormos


J. Jedrzejczak-    2014          15 companies listed on
Gas                              the alternative market
                                 (New Connect) and re-
                                 presenting construction
                                 industry

K. Predkiewicz,    2014          181 SMEs representing
P. Predkiewicz                   four industries

AUTHORS            GEOGRAPHICAL                 PERIOD
                   SCOPE

Q. Hussain,        Poland                       1991-1994
E. Nivorozhkin

F. Cornelli,       Poland and                   1992
R. Portes,         Hungary
M. Schaffer

A. Devic,          Poland and Hungary           1996-1997 (inde-
B. Krstic
                                                pendent
                                                variables'

                                                averages)
                                                1998
                                                (dependent
                                                variables'
                                                values)

M. Jerzemowska,    Poland                       1991-1994
K. Campbell                                     and 1994-
                                                1995

J. Gajdka          Poland                       1995-1997

L. Klapper,        CEE, 15 coun-                1999
V. Sarria-         tries, including
Allende,           Poland and Cro-
V. Sulla           atia. They were
                   not studied
                   separately in regressions.
A. Skowronski      Poland                       1991-1997

L. Weill           Poland, Czech                1996-1997
                   Republic, France
                   and UK

P. Bauer           Poland, Czech                2000-2001
                   Republic, Slo-
                   vakia, Hungary.
                   Poland was
                   not studied
                   separately in
                   regressions

L. Weill           CEE, 6 coun-                 1996-1998
                   tries, including
                   Poland

W. Frackowiak      Poland, France,              1992-2002
et al.             Germany, Great               for Poland
                   Britain                      and 1988-
                                                2002 for
                                                other stu-
                                                died states

E. Nivorozhkin     5 transition                 1997-2001
                   economies, inc-
                   luding Poland

R. De Haas,        CEE, 10 coun-                1993-2001
M. Peeters         tries, including
                   Poland

G. Hall,           13 European                  1995-1998
P. Hutchinson,     countries (6
N. Michaelas       post-Soviet-bloc
                   states, including
                   Poland); Poland
                   was not studied
                   separately in
                   regressions

M. Hamrol,         Poland                       2002-2004
J. Sieczko

K. Joeveer         CEE, 9 coun-                 1995-2002
                   tries, including
                   Poland. Howe-
                   ver, Poland was
                   not investigated
                   separately in
                   regressions
N. Delcoure        CEE, 4 coun-                 1996-2002
                   tries: Poland,
                   Russia, Czech
                   Republic and
                   Slovakia

K. Mazur           Poland                       1997-2004
                                                (and sub-
                                                -periods:
                                                1997-2001
                                                & 2002-
                                                2004)

A. Shamshur        CEE, 7 coun-                 1996-2006
                   tries, including
                   Poland. Poland
                   was not studied
                   separately in
                   regressions
Z. Wilimowska,     Poland                       2003-2007
M. Wilimowski

E. Chojnacka       Poland                       2002-2008

P. Hernadi,        CEE, 10 coun-                2005-2008
M. Ormos           tries, including
                   Poland, ho-
                   wever Poland
                   was not studies
                   separately in
                   regressions

M. Kedzior         13 EU countries,             Not indica-
                   including Poland             ted

G. Kirch,          CEE, 9 coun-                 1994-2004
C. Mateus,         tries, including
P. Soares Terra    Poland. Poland
                   was not studied
                   separately in
                   regressions

J. Jedrzejczak-    Poland                       2002-2011
Gas

M. Mateev,         CEE, 7 coun-                 2001-2005
P. Poutziouris,    tries, including
K. Ivanov          Poland; Poland
                   was not studied
                   separately in
                   regressions

C. Mateus,         CEE vs. Latin                1990-2003
P. Terra           America, 7 CEE
                   countries, inclu-
                   ding Poland. Ho-
                   wever, Poland
                   was not studied
                   separately in
                   regressions
N. Mokhova,        Poland, Czech                2006-2010
M. Zinecker        Republic, Slova-
                   kia, Hungary

N. Mokhova,        32 European                  2006-2011
M. Zinecker        countries, inclu-
                   ding Poland and
                   Croatia

M. Szudejko        Poland                       2004-2011

A. Biatek-         Poland                       1995-2011
Jaworska,
A. Dzik,
N. Nehrebecka

D. Ciotek,         9 EU countries,              2000-2009
J. Koralun-        including Poland
Bereznicka         as the only
                   representative
                   of CEE

P. Hernadi,        CEE, 11 coun-                2002-2007
M. Ormos           tries, including
                   Poland and
                   Croatia. Howe-
                   ver, they were
                   not investigated
                   separately.

J. Jedrzejczak-    Poland                       2009-2012
Gas

K. Predkiewicz,    Poland                       2004
P. Predkiewicz

AUTHORS            DEPENDENT VARIABLES (ALL
                   PARAMETERS ARE BASED ON
                   BOOK VALUES EXCEPT WHERE
                   INDICATED)

Q. Hussain,        1) Liabilities / assets
E. Nivorozhkin     2) Liabilities / equity
                   3) Liabilities / paid-up capital

F. Cornelli,       1) Total debt / total assets
R. Portes,         2) Change in total debt / total
M. Schaffer        assets

A. Devic,          1) Non-equity liabilities / total assets*
B. Krstic
                   2) Long-term liabilities / (long-
                   -term liabilities + equity)

                   3) (Short-term liabilities + long-
                   -term liabilities) / (short-term
                   liabilities + long-term liabilities
                   + equity)
                   4) Total debt** / capital
                   All of them in two versions: ba-
                   sed on book and market values
                   *Non-equity liabilities = pro-
                   visions + deferred income +
                   liabilities due within one year
                   (short-term liabilities) + liabi-
                   lities due after one year (long-
                   -term liabilities)
                   **Total debt = bank loans +
                   debt securities (both short- and
                   long-term)

M. Jerzemowska,    Long-term debt / total assets
K. Campbell

J. Gajdka          1) Total debt / (total debt +
                   market value of equity)
                   2) Total liabilities / (total liabili-
                   ties + equity)

L. Klapper,        1) Total liabilities / equity
V. Sarria-         2) Total debt / equity
Allende,           3) Short-term debt / equity
V. Sulla           4) Long-term debt / equity

A. Skowronski      1) Total liabilities / total balan-
                   ce sheet
                   2) Long-term debt / total balan-
                   ce sheet

L. Weill           1) (Short-term bank loans +
                   long-term debt) / total assets
                   2) (Short-term bank loans +
                   long-term debt) / (total assets -
                   accounts payable)

P. Bauer           1) Total liabilities / (total liabili-
                   ties + book value of equity)

                   2) Total liabilities / (total liabili-
                   ties + market value of equity)

L. Weill           Total liabilities / total assets

W. Frackowiak      1) Long-term debt / total debt
et al.             2) Long-term debt / (total debt
                   + equity)
                   3) (Market capitalization +
                   long-term debt) / (total assets -
                   equity + market capitalization)
                   4) (Long-term debt + equity) /
                   (total debt + equity)

E. Nivorozhkin     Total debt / (total debt + share-
                   holders' equity)

R. De Haas,        (Non-current liabilities +
M. Peeters         current liabilities--creditors)
                   / (non-current liabilities +
                   current liabilities--creditors +
                   shareholders' equity)

G. Hall,           1) Short-term debt / total
P. Hutchinson,     assets
N. Michaelas       2) Long-term debt / total
                   assets.

M. Hamrol,         1) Total liabilities
J. Sieczko         2) Long-term debt
                   3) Total debt

K. Joeveer         1) Total liabilities / total assets
                   2) Total debt / (total debt +
                   shareholders' funds)

N. Delcoure        1) Total debt / total assets
                   2) Long-term debt / total assets
                   3) Short-term debt / total
                   assets

K. Mazur           Total liabilities / total assets

A. Shamshur        Total debt / (total debt +
                   equity)

Z. Wilimowska,     1) Total debt / total assets
M. Wilimowski      2) Equity / total debt

E. Chojnacka       Change in total debt in relation
                   to total assets

P. Hernadi,        (Long-term liabilities + current
M. Ormos           loans) / (equity + long term
                   liabilities + current loans)

M. Kedzior         1) Total liabilities/(equity
                   + total liabilities)
                   2) Total long-term liabilities /
                   (total long-term liabilities +
                   equity)
G. Kirch,          1) Total liabilities / total assets
C. Mateus,         2) Total debt / total assets
P. Soares Terra    3) Long-term debt / total assets

J. Jedrzejczak-    Equity / total debt
Gas

M. Mateev,         1) Total debt / total assets
P. Poutziouris,    2) Long-term debt / total assets
K. Ivanov          3) Short-term debt / total
                   assets

C. Mateus,         1) Long-term debt / equity
P. Terra           2) Long-term financial debt
                   / (long-term financial debt +
                   short-term loans)

N. Mokhova,        1) Total debt / total assets
M. Zinecker        2) Long-term debt / total assets
                   3) Short-term debt / total
                   assets

N. Mokhova,        1) Total debt / total assets
M. Zinecker        2) Long-term liabilities/ total
                   assets
                   3) Short-term liabilities / total
                   assets

M. Szudejko        Total liabilities / assets

A. Biatek-         Total debt / (total debt + equity
Jaworska,          - revaluation reserve)
A. Dzik,
N. Nehrebecka

D. Ciotek,         1) Total debt / assets
J. Koralun-        2) Long-term debt / assets
Bereznicka

P. Hernadi,        1) (Long-term liabilities + cur-
M. Ormos           rent loans) / (long-term liabili-
                   ties + current loans + equity)
                   2) Long-term liabilities / (long-
                   -term liabilities + equity)

J. Jedrzejczak-    1) Equity / total liabilities
Gas                2) Total liabilities / total assets
                   3) Equity / foreign capital

K. Predkiewicz,    1) Total liabilities / (total liabili-
P. Predkiewicz     ties + equity)
                   2) Total debt / (total liabilities
                   + equity)

AUTHORS            INDEPENDENT VARIABLES
                   (FIRM-SPECIFIC ONLY)

Q. Hussain,        1) Age
E. Nivorozhkin     2) Retained earnings
                   3) Total assets
                   4) Profit before tax
                   5) Profit after tax
                   6) Tangible assets
                   7) Intangible assets
                   8)Tax = profit before tax -
                   profit after tax

F. Cornelli,       1) Tangibility
R. Portes,         2) Size
M. Schaffer        3) Profitability

A. Devic,          1) Size
B. Krstic          2) Profitability
                   3) Growth opportunities
                   4) Tangibility

M. Jerzemowska,    1) Size
K. Campbell        2) Profitability
                   3) Liquidity
                   4) Growth opportunities
                   5) Non-debt tax shield
                   6) Asset structure
J. Gajdka          1) Size
                   2) Product uniqueness
                   3) Profitability
                   4) Non-debt tax shield
                   5) Asset structure
L. Klapper,        1) Size
V. Sarria-         2) Age
Allende,           3) Profitability
V. Sulla           4) Growth
                   5) Tangibility
                   6) Non-debt tax shield
A. Skowronski      1) Profitability
                   2) Product uniqueness
                   3) Asset structure
                   4) Several measures of agen-
                   cy costs
L. Weill           1) Profitability
                   2) Growth
                   3) Tangibility
                   4) Innovation
                   5) Size
                   6) Age

P. Bauer           1) Size

                   2) Profitability
                   3) Tangibility
                   4) Growth opportunities
                   5) Non-debt tax shields
                   6) Volatility
L. Weill           1) Profitability
                   2) Tangibility
                   3) Growth
                   4) Size

W. Frackowiak      1) Total debt / (total debt +
et al.             equity)
                   2) Corporate income tax /
                   profit before tax
                   3) Market capitalization /
                   equity
                   4) Natural log of sales
                   revenue
                   5) Current ratio = current
                   assets / short-term liabilities
                   6) Fixed assets / depreciation
                   7) Fixed assets / total assets
                   8) Annual change in EBIT /
                   average change in EBIT
E. Nivorozhkin     1) Tangibility
                   2) Size
                   3) Age
                   4) Net trade credit
                   5) Profitability
                   6) Riskiness (variability)
R. De Haas,        1) Size
M. Peeters

                   2) Growth opportunities 3)
                   Tangibility
                   4) Profitability
                   5) Non-debt tax shield
                   6) Income variability
                   7) Trade credit
                   8) Age
                   9) Firm-specific interest rate
G. Hall,           1) Profitability
P. Hutchinson,     2) Growth rate
N. Michaelas       3) Future growth potential
                   4) Asset structure (collateral)
                   5) Size
                   6) Age
                   7) Non-debt tax shield
                   8) Stock (inventory) level
                   9) Risk
M. Hamrol,         1) Size
J. Sieczko         2) Product uniqueness
                   3) Profitability
                   4) Growth opportunities
                   5) Non-debt tax shield
                   6) Asset structure
                   7) Cost of capital
K. Joeveer         1) Profitability
                   2) Tangibility
                   3) Size
                   4) Median industry average
                   5) Age

N. Delcoure        1) Tangibility
                   2) Size
                   3) Risk (volatility)
                   4) Growth opportunities
                   5) Profitability
                   6) Non-debt tax shield
                   7) The impact of taxes

K. Mazur           1) Asset structure
                   2) Profitability
                   3)Development prospects
                   4) Liquidity
                   5) Size
                   6) Product uniqueness
                   7) Operating risk
                   8) Non-debt tax shield
                   9) Effective tax rate
                   10) Dividend policy
A. Shamshur        1) Size
                   2) Tangibility
                   3) Profitability
                   4) Maturity of
                   5) Age
                   6) Median industry leverage
Z. Wilimowska,     1) Size
M. Wilimowski      2) Non-debt tax
                   3) Profitability
                   4) Product type
                   5) Asset structure
                   6) Industry type
                   7) Liquidity
                   8) Cost of equity
                   9) WACC
E. Chojnacka       1) Capital deficit
                   2) Size
                   3) Profitability
                   4) Product uniqueness
                   5) Growth opportunities
                   6) Asset structure
                   7) Non-debt tax shield
                   8) Liquidity
P. Hernadi,        1) Tax
M. Ormos

                   2) Size 3) Profitability (ROA)
                   4) Risk
                   5) Availability of internal
                   funds
                   6) Tangibility
                   7) Intangibility
                   8) Non-debt tax shield
                   9) Growth opportunities
M. Kedzior         1) Risk
                   2) Size
                   3) Growth opportunities
                   4) ROA (profitability)
                   5) Tangible fixed
G. Kirch,          1) Size
C. Mateus,         2) Growth opportunities 3)
P. Soares Terra    Profitability
                   4) Business risk
                   5) Tangibility
                   6) Effective tax rate
                   7) Age (as a proxy for repu-
                   tation)
J. Jedrzejczak-    1) Asset structure
Gas                2) Return on sales
                   3) Return on assets
                   4) Liquidity
                   5) Size
                   6) Growth opportunities 7)
                   Product
                   8) Effective tax rate
M. Mateev,         1) Cash flow ratio
P. Poutziouris,    2) Profitability
K. Ivanov          3) Future growth opportu-
                   nities
                   4) Current ratio
                   5) Asset structure
                   6) Size

C. Mateus,         1) Size
P. Terra           2) Growth opportunities
                   3) Profitability = ROA
                   4) Business risk = DOL
                   5) Liquidity = CR
                   6) Tangibility
                   7) Tax effects

N. Mokhova,        1) Profitability
M. Zinecker        2) Growth opportunities
                   3) Tangibility = fixed assets /
                   total assets
                   4) Size
N. Mokhova,        1) Profitability
M. Zinecker        2) Growth opportunities
                   3) Tangibility
                   4) Size
                   5) Non-debt tax shield

M. Szudejko        1) Asset structure
                   2) Profitability
                   3) Liquidity = CR
                   4) Size
                   5) Growth opportunities
                   6) Product uniqueness
                   7) Non-debt tax shield
                   8) Effective tax rate
                   9) Volatility
                   10) Industry average leve-
                   rage
                   11) Debt change
A. Biatek-         1) Collateral
Jaworska,          2) Cumulated return on
A. Dzik,           equity
N. Nehrebecka      3) Dynamic self-financing
                   4) Quick ratio
                   5) Non-debt tax shield
                   6) Debt tax shield
                   7) Growth opportunities
                   8) Effective tax rate

                   9) Payment delays ratio 10)
                   The authors' bankruptcy
                   prediction ratio
D. Ciotek,         1) Size
J. Koralun-        2) Profitability
Bereznicka         3) Asset structure

P. Hernadi,        1) Corporate
M. Ormos           2) Size
                   3) Profitability
                   4) Liquidity
                   5) Risk (volatility of earnings)
                   6) Composition of assets
                   (tangibility)
                   8) Composition of assets
                   (intangibility)
                   9) Non-debt tax
                   10) Position in life cycle 11)
                   Improvement in cost effec-
                   tiveness
                   12) Current growth
                   12) Operating income (extra
                   accounting revenues)
                   13) Variability of tangible
                   assets
                   14) Variability of intangible
                   15) Variability of cash
                   16) Variability of deprecia-
                   tion
J. Jedrzejczak-    1) Structure of assets
Gas                2) Return on sale
                   3) Return on assets
                   4) Financial liquidity
                   5)Size of the enterprise
                   6) Development prospects
                   7) Effective tax rate

K. Predkiewicz,    1) Size
P. Predkiewicz     2) Age

AUTHORS            OBJECTIVE

Q. Hussain,        To study the determinants of
E. Nivorozhkin     leverage in order to reveal
                   the way firms choose among
                   retained earnings, debt and
                   stock issuances.

F. Cornelli,       To formulate a theory as to
R. Portes,         the optimal capital structure
M. Schaffer        in CEE economies and to ana-
                   lyze actual capital structure
                   in this region in comparison
                   with Western economies.

A. Devic,          To explore the determinants
B. Krstic          of leverage.

M. Jerzemowska,    To study the factors influ-
K. Campbell        encing the capital structure
                   decisions.

J. Gajdka          To study the factors influ-
                   encing the capital structure
                   decisions.

L. Klapper,        To analyze general financing
V. Sarria-         patterns in CEE states and to
Allende,           test the way selected firm-
V. Sulla           -specific quantitative factors
                   influence leverage.

A. Skowronski      To verify empirically three
                   theories: agency costs,
                   pecking order, and liquidation
                   value.

L. Weill           To study the factors determi-
                   ning leverage by comparing
                   Western European patters
                   with Eastern European ones,
                   with the emphasis on the
                   determinants of access to
                   credit.
P. Bauer           To investigate the influence of
                   selected firm-specific quanti-
                   tative factors on leverage.

L. Weill           To examine the influence of
                   selected firm-specific quan-
                   titative factors on leverage
                   in order to compare capital
                   structure determinants in
                   CEE states and in Western
                   European countries.
W. Frackowiak      To test if the quantitative
et al.             firm-specific factors demon-
                   strated in the theoretical
                   literature influence capital
                   structure choices in the inve-
                   stigated states.

E. Nivorozhkin     To study the determinants of
                   firms' target capital structure
                   and the speed of leverage
                   adjustments.

R. De Haas,        To study the capital structure
M. Peeters         determinants and shifts in
                   order to get a better under-
                   standing of the development
                   of the financial systems in
                   CEE countries.

G. Hall,           To study the differences in
P. Hutchinson,     capital structures between
N. Michaelas       post-Soviet-bloc states and
                   non-Soviet-bloc European
                   countries in order to reveal
                   if they can be explained by
                   firm-specific or country-speci-
                   fic factors.

M. Hamrol,         To examine the way selected
J. Sieczko         quantitative firm-specific
                   factors influence leverage.

K. Joeveer         To explore the significance
                   of firm-specific, institutional,
                   and macroeconomic factors
                   in explaining variation in
                   leverage.

N. Delcoure        To test whether capital
                   structure patters in CEE
                   countries fit the traditional
                   theories developed to explain
                   financing behavior in Western
                   economies.

K. Mazur           To identify the set of factors
                   which determine capital
                   structure in the most signifi-
                   cant way and to stipulate the
                   sign of the relationship.

A. Shamshur        To examine the importance
                   of financial constraints for ca-
                   pital structure decisions and
                   factors determining them.

Z. Wilimowska,     To study the impact of selec-
M. Wilimowski      ted quantitative firm-specific
                   factors on leverage and firm
                   value.

E. Chojnacka       To identify the factors deter-
                   mining leverage, especially
                   those which support the
                   pecking order theory.

P. Hernadi,        To verify empirically the pri-
M. Ormos           me capital structure theories
                   through testing the associa-
                   tion of selected firm-specific
                   quantitative factors and
                   leverage.

M. Kedzior         To compare capital structure
                   and its determinants in new
                   and old EU member states.

G. Kirch,          To test the explanatory power
C. Mateus,         of firm-specific and country-
P. Soares Terra    -specific factors in determi-
                   ning leverage.

J. Jedrzejczak-    To test the impact of selected
Gas                quantitative firm-specific and
                   macroeconomic factors on
                   leverage.

M. Mateev,         To study how firm-specific
P. Poutziouris,    factors influence capital
K. Ivanov          structure.

C. Mateus,         To study the joint decisions
P. Terra           concerning leverage and
                   maturity of debt (long-term
                   vs. short-term).

N. Mokhova,        To study the relation between
M. Zinecker        capital structure and sovere-
                   ign credit ratings.

N. Mokhova,        To examine the influence se-
M. Zinecker        lected firm-specific quantita-
                   tive factors have on leverage
                   and to study the shifts in ca-
                   pital structure resulting from
                   the membership in the EU.
M. Szudejko        To determine if firms tend to
                   modify their leverage ratios
                   towards industry averages.

A. Biatek-         To study the way selected
Jaworska,          macroeconomic, microeco-
A. Dzik,           nomic (firm-specific) and
N. Nehrebecka      structural factors influence
                   leverage.

D. Ciotek,         To determine if the firm size
J. Koralun-        determines the strength of
Bereznicka         the relationship between
                   leverage and country-specific
                   / industry-specific factors,
                   respectively.
P. Hernadi,        To test the relevance of three
M. Ormos           theories: static trade-off the-
                   ory, pecking order theory and
                   agency theory and to check
                   whether the capital structure
                   decisions in CEE states are
                   similar to those made in the
                   most developed countries.

J. Jedrzejczak-    To study the way selected
Gas                firm-specific quantitative
                   factors influence leverage.

K. Predkiewicz,    To study the impact of selec-
P. Predkiewicz     ted firm-specific quantitative
                   and qualitative factors on
                   leverage.
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Author:Cwynar, Andrzej; Cwynar, Wiktor; Dankiewicz, Robert
Publication:eFinanse
Geographic Code:4E0WE
Date:Dec 1, 2015
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