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Finance
CAPITAL STRUCTURE ANALYSIS
– THEORIES AND DETERMINANTS
VALIDATION BASED ON EVIDENCE FROM
THE CZECH REPUBLIC
Jana Heckenbe ge o á1, I ena Honko á2
1 Uni e si y o Pa dubice, Facul y o Economics and Adminis a ion, Ins i u e o Ma hema ics and Quan i a i e
Me hods, Czech Republic, ORCID: 0000-0003-2468-5895, [email p o ec ed];
2 Uni e si y o Pa dubice, Facul y o Economics and Adminis a ion, Ins i u e o Economy and Managemen , Czech
Republic, ORCID: 0000-0002-9335-040X, [email p o ec ed] (co esponding au ho ).
Abs ac : The op imal capi al s uc u e is a key p econdi ion o business, e en hough he ask
o de ining he op imal capi al s uc u e can be di icul . P e ious s udies p esen many di e en
and mu ually con adic o y ac o s ha should be conside ed wi h espec o manage ial s a egic
inancial decisions. The i s pa o he p esen ed con ibu ion summa ises he e ec s o he mos
equen capi al s uc u e de e minan s and e iews he wo ld’s mos impo an heo ies abou he
beha iou o en e p ises when deciding on capi al s uc u e. The aim o ou con ibu ion is he
analysis o capi al s uc u e beha iou in he Czech en i onmen . Fundamen al capi al s uc u e
heo y is e ealed by s a is ical hypo heses es ing. Mo eo e , we a e mainly a ge ing signi ican
de e minan s o capi al s uc u e. The esul s help us o c ea e gene al ecommenda ions o he
inancial managemen o Czech companies. In he scope o ou s udy, he e a e app oxima ely
a housand na ional inancial s a emen s o Czech companies om he mos impo an sec o s
o economic ac i i y o he pe iod 2016–2019. The co ela ion analysis wi h pa ial co ela ion
coe icien and mul iple linea eg ession analysis was u ilised o de e mine he e ec s and
signi icance o he indi idual de e minan s. Da a show ha Czech companies do no p e e deb
inancing ecommended by some capi al s uc u e heo ies. Thei inancial managemen beha iou
co esponds o pecking o de heo y wi h insu icien u ilisa ion o ax shield. Sec o wise analyses
p o e only one excep ion; mo o ehicles wholesale, e ail ade, epai and main enance sec o
gene ally p e e s inancing by deb . Based on he li e a u e e iew, we selec ed six signi ican
de e minan s o capi al s uc u e: size, e u n on asse s (ROA), e u n on equi y (ROE), angibili y,
asse g ow h and du a ion. Ad anced s a is ical analyses show he powe and in luence o each
de e minan on capi al s uc u e and hei mu ual ela ions. Au oco ela ions can nega i ely a ec
he esul s o eg ession analyses. We can conclude ha he capi al s uc u e o Czech companies
is mainly in luenced by angibili y and ROA.
Keywo ds: Capi al s uc u e, indeb edness, de e minan s o capi al s uc u e, p o i abili y, angibili y,
asse g ow h.
JEL Classi ica ion: C12, G31, G32.
APA S yle Ci a ion: Heckenbe ge o á, J., & Honko á, I. (2023). Capi al S uc u e Analysis
– Theo ies and De e minan s Valida ion Based on E idence om he Czech Republic.
E&M Economics and Managemen , 26(1), 145–164. h ps://doi.o g/10.15240/ ul/001/2023-1-009
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Finance
In oduc ion
U ilisa ion o he balanced capi al s uc u e c e-
a es he base o he s able de elopmen o any
company. Ha ing op imal capi al s uc u e is
a key s a egic ask o inancial managemen .
Cu en ly, he e is a my iad o heo ies desc ib-
ing he cu en s a e and ecommending he
op imal s a e o en e p ises’ capi al s uc u e.
Fundamen al ones a e he Modigliani-Mille
heo em (Modigliani & Mille , 1958, 1963), he
ade-o heo y (K aus & Li zenbe ge , 1973),
he pecking o de heo y o capi al s uc u e
(Fishe & Donaldson, 1962), and dynamic
ade-o models (B ealey & Mye s, 2014).
Ve i ying he s a emen : “The beha iou
o Czech companies con i ms he p e e ence
o deb inancing o e equi y. This beha iou
is he same ac oss sec o s.” is he i s goal o
his con ibu ion. Based on he esul , we can
e eal undamen al capi al s uc u e heo y o
Czech companies and we can se he ecom-
menda ions alid o he Czech en i onmen
in gene al. This will help inancial manage s
o lead hei en e p ises in o balanced capi al
s uc u es.
Capi al s uc u e de e minan s ha e been
examined in a huge se o s udies. Mos cu -
en wo ks ocus on he powe o dependence;
ne e heless we can s ill ind he esea ch gap
wi hin hem. They a e missing mu ual ela ions
and in luences, classi ica ion, and egional
ocus. Main goal o his con ibu ion is he clas-
si ica ion o signi ican de e minan s o capi al
s uc u e in he scope o he Czech Republic
oge he wi h au oco ela ions and powe o
dependence.
This pape consis s o h ee main sec ions:
Theo e ical Backg ound, Resea ch Me hodo-
logy, and Resea ch Resul s. The Theo e ical
Backg ound sec ion summa ises and e iews
he wo ld’s mos impo an heo ies abou he
beha iou o en e p ises when deciding on
capi al s uc u e and he e ec s o he mos
equen capi al s uc u e de e minan s. The
Resea ch Resul s sec ion is di ided in o se en
subsec ions: Sample Analysis o he O iginal
Da ase o Capi al S uc u e, Ve i ica ion o H1,
Sample Cha ac e is ics o Selec ed CS de e -
minan s, signi icance o selec ed CS de e mi-
nan s, Mu ual Rela ions be ween De e minan s,
Linea Reg ession Model wi h All Selec ed
De e minan s, and Summa y o Resul s and
Discussion. The whole con ibu ion is ended
wi h a concluding sec ion.
1. Theo e ical Backg ound
1.1 View on Theo ies o Capi al S uc u e
Se e al impo an heo ies ha e been p oposed
ega ding capi al s uc u e.
The Modigliani-Mille (M&M) heo em is
a capi al s uc u e app oach named a e F an-
co Modigliani and Me on Mille , wo econom-
ics p o esso s who s udied capi al s uc u e
heo y and collabo a ed o de elop he capi al
s uc u e i ele ance p oposi ion in 1958. This
p oposi ion s a es ha , in pe ec ma ke s, he
capi al s uc u e a company uses does no
ma e , because he ma ke alue o a i m is
de e mined by i s ea ning powe and he isk o
i s unde lying asse s. Acco ding o Modigliani
and Mille , alue is independen o he me hod
o inancing used and he company’s in es -
men s. The M&M heo em made wo ollowing
p oposi ions. The i s one asse s ha he cap-
i al s uc u e is i ele an o he alue o a i m.
The alue o wo iden ical i ms would emain
he same, and alue would no be a ec ed by
he choice o inancing adop ed o suppo he
asse s. The alue o a i m is dependen on he
expec ed u u e ea nings when he e a e no
axes (Modigliani & Mille , 1958). P oposi ion II
s a es ha he inancial le e age boos s he
alue o a i m and educes WACC when ax
in o ma ion is a ailable. While he Modigliani
and Mille heo em is s udied in inance, eal
i ms ace axes, c edi isk, ansac ion cos s,
and ine icien ma ke s, which c ea es a mix o
deb and equi y inancing impo an (Modigliani
& Mille , 1963).
The ade-o heo y o capi al s uc u e ep-
esen s he idea ha a company chooses how
much deb inance and how much equi y inance
o use. The classical e sion o he hypo hesis
aces back o K aus and Li zenbe ge (1973),
who conside ed a balance be ween he dead-
weigh cos s o bank up cy and he ax-sa ing
bene i s o deb . This heo y is o en se up as
a compe i o heo y o he pecking o de heo y
o capi al s uc u e (F ank & Goyal, 2007).
The pecking o de heo y pos ula es ha
he cos o inancing inc eases wi h asymme ic
in o ma ion. This heo y was i s sugges ed by
Fishe and Donaldson (1962), and i was modi-
ied by S ewa C. Mye s and Nicolas Majlu
in 1984 (Mye s & Majlu , 1984). Acco ding o
his heo y, asymme ic in o ma ion a ec s he
choice be ween in e nal and ex e nal inanc-
ing. Asymme ic in o ma ion a o s he issue o
in e nal esou ces o e ex e nal ones, as he
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issue o deb signals he boa d’s con idence
ha an in es men is p o i able and ha he
cu en s ock p ices in unde alues (B ealey
& Mye s, 2014).
Fama and F ench (1999) c i icised bo h he
ade-o heo y and he pecking-o de heo y
acco ding o Mye s’ a gumen (Mye s, 1984).
Dynamic ade-o models ha e been also con-
i med as well as ejec ed empi ically.
The indings by Boo h e al. (2001) sugges
ha , al hough some o he insigh s om mode n
inance heo y a e applicable ac oss coun ies,
much p og ess emains o be made o unde -
s and he impac o he di e en ins i u ional
ea u es on capi al s uc u e choices. Le e age
di e s ac oss coun ies (De Jong e al., 2008).
Yang e al. (2021) showed ha Ko ean and
G eek shipping companies ollow he pecking-
o de heo y. Indeed, he empi ical e idence
om F ank and Goyal (2007) seemed eason-
ably consis en wi h some e sions o he ade-
o heo y o capi al s uc u e. Simila ly, Delikanli
(2020) p esen ed ha SMEs in Tu key had ied
o mee hei inancing needs wi h in e nal e-
sou ces, ac ing in alignmen wi h pecking-o de
heo y. Nga no e al. (2021) suppo ed he iew
o pecking-o de heo y as empi ical e idence
o he opposi e e ec be ween i ms’ p o i and
capi al s uc u e. The di ec ion o in luence o
he diagnosed i m-speci ic ac o s had been
consis en wi h pecking-o de heo y, as s a ed
by Cze wonka and Jawo ski (2021). An impo -
an pu pose o he heo y is o explain he ac
ha co po a ions a e usually inanced pa ly
wi h deb and pa ly wi h equi y. This heo y
s a es ha inancing wi h deb b ings ax ben-
e i s as well as cos s, and he cos s o inancial
dis ess include bo h bank up cy cos s o deb
and non-bank up cy cos s. Mye s (1984) sug-
ges ed ha i he ade-o heo y we e ue,
hen i ms ough o ha e much highe deb
le els han we obse e in eali y.
1.2 Recen Resea ch on De e minan s
o Capi al S uc u e
Se e al s udies we e conside ed du ing he
p epa a ion o ou pape . Chand a e al. (2021)
ound ha he ac o s ha in luence capi al
s uc u e included e ec i e ax a e, inancial
lexibili y, g ow h, uniqueness, asse u ilisa ion,
i m size, and angibili y. Nga no e al. (2021)
indica ed ha capi al s uc u e had a nega-
i e e ec on bo h e u n on asse s and e u n
on equi y. Jawo ski and Cze wonka (2021)
ob ained s ong e idence o a posi i e ela ion-
ship be ween co po a e deb and angibili y and
size and a nega i e ela ionship o p o i abili y
and liquidi y. The ac o s ha also a ec he
sha e o deb capi al u ned ou o be g ow h
(posi i e ela ionship) and non-deb ax shield
(nega i e ela ionship). They u he showed
ha he g ow h o indus y business isk was
accompanied by any inc ease in co po a e
deb . Mo eo e , hese au ho s showed ha
a business- iendly ins i u ional en i onmen
was an impo an in luencing ac o on he in-
deb edness o companies. I inc eased he le-
e age and, consequen ly he e u n on equi y,
especially in CEE coun ies.
Gu usamy (2021) p esen ed ha he ixed-
e ec s esul s, size, isk, and p o i abili y had
a highly signi ican ela ionship wi h le e age.
Meanwhile, g ow h oppo uni ies and angibili y
ep esen ed insigni ican alues. The s udy e-
ealed ha he explana o y a iables o he p o-
mo e s’ owne ship and ins i u ional owne ship
had a nega i e impac on le e age, while co po-
a e owne ship had a posi i e in luence on he
capi al s uc u e decision. Feny es e al. (2020)
p esen ed he ag icul u al and ood indus y
in V-4 coun ies and showed ha mo e p o i -
able companies we e less dependen on deb
inance, while he as -g owing companies had
limi ed access o he inancial ma ke . Company
size had a signi ican e ec only in he Czech
Republic. Dokulil e al. (2020) showed ha he
budge ing p ac ices o he Czech i ms we e no
in luenced by adi ional ac o s (e.g., he size
o he company and i s gi en economic sec-
o ) o ce ain o he aspec s. Essen ial ace s
include he owne ship s uc u e and he sha e
o o eign capi al in ol ed, he la e a ec ing
he ex en o au onomy o he business as o
he budge a y p ocess. Delikanli (2020) ound
ha no signi ican di e ence was obse ed
based on size. The analysed SMEs’ asse
g ow h and inc ease in p o i abili y caused an
inc ease in inancial deb . Memon e al. (2020)
showed ha i ms’ size, p o i abili y, s ock
ma ke de elopmen , and GDP we e ela i ely
consis en de e minan s.
Belas e al. (2018) s udied he impac o
ou de e minan s: egion, business a ea,
numbe o employees, and business du a ion,
on he manage ’s decisions ega ding capi al
s uc u e in he SMEs in he Czech Republic.
Thei main inding was ha he size o he com-
pany, measu ed by he numbe o employees,
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a ec s i s a i ude owa d he olume o o eign
and i s own capi al used o inance i s ac i i ies.
The analysis also showed ha en ep eneu s
who had been ope a ing hei business a
longe du a ion p e e ed mo e o eign capi al
han hei own capi al. The business a ea and
egion whe e he en e p ise was loca ed we e
insigni ican de e minan s. Mu salim e al.
(2017) analysed he capi al s uc u e and i s
de e minan s as p o i abili y, size, and ola il-
i y. Fu he mo e, Balios e al. (2016) ound ha
he e ec o capi al s uc u e de e minan s on
le e age had no changed in an en i onmen
o economic c isis, la ge SMEs had con inued
o show highe deb a ios, he ela ionship be-
ween p o i abili y and angibili y o asse s wi h
le e age had con inued o be nega i e, and
g ow h had been posi i ely ela ed o le e age.
In addi ion, Se asquei o e al. (2016) showed
ha capi al s uc u e p o i abili y, size, du a ion,
angibili y, and egion we e de e minan s.
Alipou e al. (2015) sugges ed ha a i-
ables such as i m size, inancial lexibili y,
asse s uc u e, p o i abili y, liquidi y, g ow h,
isk, and owne ship had a ec ed all measu es
o capi al s uc u e among I anian co po a-
ions. They showed ha , due o he nega i e
ela ionship be ween p o i abili y and capi al
s uc u e, in es o s had o conside capi al
s uc u e be o e making in es men decisions.
Růčko á (2015) showed ha capi al s uc u e
was de e mined by sec o , business isk, inan-
cial lexibili y, app oach o isk, and axes. On
he o he hand, he key de e minan s o capi al
s uc u e, acco ding o Chadha and Sha ma
(2015), we e size, du a ion, angibili y, g ow h,
p o i abili y, isk, uniqueness, and owne ship.
Fu he mo e, Va a u (2015) showed ha
capi al s uc u e was nega i ely in luenced by
p o i abili y. Oz ekin (2015) obse ed high de-
pendence be ween capi al s uc u e and size,
angibili y, p o i abili y, and en i onmen , and
Chang e al. (2014) iden i ied p o i abili y, in-
dus y le e age, asse g ow h, angibili y, i m
size, s a e con ol, and he la ges sha ehold-
ing as eliable co e ac o s explaining book
le e age. Robb and Robinson (2014) ound
ha he capi al s uc u e was de e mined by
c edi ma ke s and du a ion. In addi ion, Dawa
(2014) ound a ela ion be ween le e age and
i m pe o mance a e con olling o ac o s
such as size, age, angibili y, g ow h, liquidi y,
and ad e ising and showed a nega i e depen-
dence on i m pe o mance.
Bay akda oglu e al. (2013) showed ha
la ge companies and as -g owing companies
ended owa d a highe le e age. Aulo á and
Hla sa (2013) analysed Czech ag icul u al
companies and ound ha he mos impo an
de e minan s we e size and asse colla e al.
P ášilo á (2012) ound ha capi al s uc u e
was in luenced by du a ion (posi i ely) and
p o i abili y (nega i ely). Acco ding o P ášilo á,
he e was a nega i e dependence o size and
posi i e dependence o e ained ea nings in
a speci ic IT sec o . Ramjee and Gwa idzo
(2012) ound ha he capi al s uc u e had been
de e mined by angibili y, g ow h, size, and
isk. They also showed he nega i e in luence
o p o i abili y and ax. Chen and Chen (2011)
sugges ed ha i m size, p o i abili y, and asse
s uc u e we e explana o y a iables o capi al
s uc u e. P e iously, he e had been some di -
e ences in he capi al s uc u e among indus y
ype, which hey also p esen ed. Fu he mo e,
hese esea che s ound ha p o i abili y and
i m size had a g ea e impac on capi al s uc-
u e in non-elec onic indus ies. Kouki and Ben
Said (2011) analysed F ench companies and
ound ha capi al s uc u e was de e mined by
size, p o i abili y, g ow h, ax shield, asymme ic
in o ma ion, and inancial dis ess.
Bhai d and Lucey (2010) ound ha he
in luence o age, size, owne ship s uc u e,
and p o ision o colla e al we e simila ac oss
indus y sec o s, indica ing he uni e sal e ec
o in o ma ion asymme ies. F ank and Goyal
(2007) explained he mos eliable ac o s o
le e age as median indus y le e age (+ e ec
on le e age), ma ke - o-book asse s a io (−),
angibili y (+), p o i s (−), log o asse s (+), and
expec ed in la ion (+). They also ound ha
di idend-paying i ms ended o ha e lowe le-
e age. They also p esen ed ha size, ma ke -
o-book a io, and he e ec o in la ion we e no
eliable. Ma ks e al. (2009) showed ha he
ollowing ac o s in luenced capi al s uc u e:
cha ac e o companies, li e cycle, dynamics in
he sec o , sha eholde s’ goals, capi al ma ke ,
legisla i e, and sec o ends.
Vi iani (2008) ound a posi i e ela ionship
be ween deb and owne ship. He also showed
ha capi al s uc u e was a ec ed by sec o .
Valach (2008) p esen ed ha capi al s uc u e
was a ec ed by size, p o i abili y, angibili y, and
g ow h. Acco ding o Valach, axes and sec o
we e no signi ican ac o s. Almazan and Mo-
lina (2005) ound he dispe sion in le e age
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a ios among i ms wi hin an indus y and e-
la ed his dispe sion o indus y cha ac e is ics.
Song (2005) ound ha he de e minan s o
angible asse s and axes in luenced capi al
s uc u e. Baue (2004) p esen ed ha he
le e age o Czech-lis ed i ms was posi i ely
co ela ed wi h size, and i was nega i ely co -
ela ed wi h p o i abili y and angibili y. The e
was a nega i e ela ionship be ween le e age
measu ed in ma ke alue and g ow h oppo -
uni ies. Mo eo e , le e age was posi i ely co -
ela ed wi h ax and nega i ely co ela ed wi h
non-deb ax shields, albei on a lowe le el o
s a is ical signi icance.
Tab. 1 summa ises signi ican capi al s uc-
u e de e minan s men ioned in p e ious s ud-
ies. The mos equen de e minan s a e: size,
p o i abili y, angibili y, asse g ow h, sec o , and
du a ion.
O he ac o s no men ioned in Tab. 1 ha
in luence he capi al s uc u e can be sum-
ma ised as ollows:
a) Taxes and ax shield, e.g., Fan e al. (2012),
H dý (2011), Kuma e al., (2017) and,
Aca a ci (2015).
b) Risk including i m isk and mac oeconomic
isk, e.g., Li e al., (2021) and, Baum e al.
(2017).
Au ho s Yea Size P o i abili y Tangibili y Asse
g ow h Sec o Du a ion
Chand a e al. 2021 x x x
Nga no e al. 2021 −
Jawo ski & Cze wonka 2021 +−+ +
Gu usamy 2021 x x (x) (x)
Feny es e al. 2020 x −
Dokulil e al. 2020 x x
Delikanli 2020 (x) x +
Memon e al. 2020 x x
Belas e al. 2018 x (x) +
Mu salim e al. 2017 x x
Balios e al. 2016 +− − +
Se asquei o e al. 2016 x x x x
Alipou e al. 2015 x − x x
Růčko á 2015 x
Chadha & Sha ma 2015 x x x x x
Va a u 2015 −
Oz ekin 2015 x x x
Chang e al. 2014 x x x x x
Robb & Robinson 2014 x
Dawa 2014 − x x x x
Bay akda oglu e al. 2013 + +
Aulo á & Hla sa 2013 x
P ášilo á 2012 − − +
Ramjee & Gwa idzo 2012 x − x x
Tab. 1: The mos equen de e minan s o capi al s uc u e – Pa 1
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c) Cha ac e is ics o CEO, e.g., CEO ag-
g essi eness (P ášilo á, 2012; Růčko á,
2015), CEO age (McGuinness, 2021), CEO
beha iou unde p essu e (Be ge e al.,
1997), managemen discussion and analy-
sis (Wang e al., 2021), and educa ed CEO
(Honjo, 2021).
d) O he inne de e minan s: di idend paying
(F ank & Goyal, 2007), ma ke alue (Bake
& Wu gle , 2002), asymme ic in o ma ion
(Se asquei o e al., 2016), inancial lexibil-
i y (Alipou e al., 2015), ea nings manage-
men in Okye e e al. (2021), and An e al.
(2016), ad e ising (Dawa , 2014), deb ca-
paci y (Honjo, 2021), uniqueness (Chadha
& Sha ma, 2015), inancial s ess = isk o
losing con ol (Cho e al., 2014), liquidi y
(Jawo ski & Cze wonka, 2021).
e) Owne ship: local owne ship (Ma uk & Sjo-
g en, 2021), ins i u ional owne ship and co -
po a e owne ship (Gu usamy, 2021), and
owne ship gene ally (Dokulil e al., 2020).
) Loca ion: egion (De Jong e al., 2008; Gao
e al., 2011), local co up ion (Fan e al.,
2012), de eloped and de eloping coun ies
(Bake & Wu gle , 2002).
g) Mac oeconomic and o he ex e nal de-
e minan s such as in la ion (Jawo ski
& Cze wonka, 2021), inancial ins i u ion
de elopmen capi al ma ke (Robb & Rob-
inson, 2014), GDP and de elopmen o
ma ke (Memon e al., 2020), economic
policy unce ain y (Li & Qui, 2021), inancial
c isis (Baum e al., 2017), s a e con ol
(Chang e al., 2014), legisla ion (Fan e al.,
2012), and compe i ion (P ášilo á, 2012).
Al hough he e exis a my iad o esea ch
pape s dealing wi h capi al s uc u e de e mi-
nan s, as summa ised abo e, we can s ill ind
he esea ch gap wi hin hem. In gene al, p e i-
ous s udies do no ecognise posi i e o nega-
i e dependence be ween capi al s uc u e and
i s de e minan , and hey a e no ocused on he
Czech en i onmen . P o i abili y is he second
mos equen de e minan o he capi al s uc-
u e; howe e , measu es o p o i abili y a e no
uni ied and some imes no e en men ioned. We
a e examining wo p o i abili y measu es (ROA
and ROE) o see, which one o hem is a be e
capi al s uc u e de e minan . Mu ual ela ions
be ween de e minan s a e gene ally neglec ed
as well. A basic assump ion o eg ession anal-
ysis is ha explana o y a iables a e indepen-
den . The e o e u ilisa ion o s ongly co ela ed
de e minan s can signi ican ly a ec eg ession
model esul s.
Au ho s Yea Size P o i abili y Tangibili y Asse
g ow h Sec o Du a ion
Chen & Chen 2011 x x x x
Kouki & Ben Said 2011 x x x
Bhai d e al. 2010 x x x
F ank & Goyal 2007 (x) − + + +
Ma ks e al. 2009 x x
Valach 2008 x x x x (x)
Vi iani 2008 x
Almazan & Molina 2005 x
Song 2005 x
Baue 2004 +− −
F equency 24 22 15 13 9 8
Sou ce: own
No e: x : con i med dependence; + : con i med posi i e dependence; – : con i med nega i e dependence; (x) : con i med
independence.
Tab. 1: The mos equen de e minan s o capi al s uc u e – Pa 2
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1.3 Goals and Hypo heses
As a i s s ep, a hypo hesis has been
es ablished o e eal he gene al beha iou o
en e p ises in he Czech en i onmen . Ve i ied
hypo hesis H1 is s a ed as ollows.
H1: The beha iou o Czech companies
con i ms he p e e ence o deb inancing
o e equi y. This beha iou is he same ac oss
sec o s.
Hypo hesis s a emen o igins om he
ade-o heo y (K aus and Li zenbe ge , 1973),
whe e deb inancing is p e e ed o e equi y up
o a gi en c i ical inancial le el.
Main aim o ou con ibu ion is a ge ed in
he second s ep, whe e signi ican de e minan s
o he capi al s uc u e o Czech companies a e
de ec ed. We a e sea ching hem wi hin he
mos equen de e minan s: size (SI), p o i -
abili y (ROA, ROE), angibili y (T), asse g ow h
(AG), sec o (SE), and du a ion (DU), ha has
been iden i ied in he p e ious sec ion (Tab. 1).
Addi ionally o he s a emen o capi al s uc u e
de e minan signi icance, we classi y hem
in o ou g oups: s ong signi icance, medium
signi icance, weak bu s ill signi ican and no
signi ican . Mo eo e , we ecognise posi i e
esp. nega i e impac o selec ed de e minan
on indeb edness. Compa ing he pe o mance
o wo di e en p o i abili y measu es (ROA and
ROE), we can ecommend he one mo e sui -
able o he Czech en i onmen .
Las bu no leas , he co ela ion analysis
wi hin selec ed de e minan s is pe o med.
I e eals co ela ions ha can mis ep esen
eg ession analysis esul s. This leads o he
ecommenda ion abou pai s o de e minan s
ha should no be applied oge he .
2. Resea ch Me hodology
2.1 Da a Sou ces
The sou ce da ase , gene a ed om selec ed
eco ds in he publicly a ailable egis e (ARES,
2020), consis s o 1,196 unconsolida ed na-
ional inancial s a emen s o Czech companies
wi hin he pe iod o 2016–2019. A c ucial ac o
o company selec ion is ha hey ha e no been
liquida ed be o e Augus 31, 2020. O he en-
ance c i e ia, such as he legal o m, size, and
du a ion we e no implemen ed. Tab. 2 p esen s
da a p ocessing o de e mine de e minan s.
2.2 Me hodology
Fi s o all, he en i e da ase was analysed
using sample s a is ics. Ou lie s and un eliable
De e minan Regis y da a used Fo m o p ocessing
Size (SI) Numbe o employees
Classi ica ion acco ding me hodology
(Zákon č. 563/199 Sb., Zákon o úče nic í, 2016
[Ac No. 563/199 Coll. on Accoun ing,
he Czech Republic, 2016**])
P o i abili y P o i , equi y, asse s Indica o s e u n on asse (ROA) and e u n on equi y
(ROE)
Tangibili y (T) Fixed asse s, asse s Sha e o ixed asse s in o al asse s
Asse g ow h (AG) Asse s Ra e o asse g ow h
Sec o (SE) Economic ac i i y
Classi ica ion o selec ed* economic ac i i ies
CZ-NACE: A – Ag icul u e, o es y, and ishe ies;
C – Manu ac u ing; F – Cons uc ion; G – Wholesale
and e ail ade, epai and main enance o mo o
ehicles; I – Accommoda ion, ca e ing, and hospi ali y;
J – In o ma ion and communica ion ac i i ies
Du a ion (DU) Age o company
Sou ce: own
No e: *The mos impo an a eas o he na ional economy o he han inance and insu ance (A ea K) we e selec ed, as
his sec o is speci ic o i s high indeb edness, which is gi en by ecei ing deposi s om clien s; **h ps://aplikace.m c .
cz/sbi ka-zakonu/Sea chResul .aspx?q=2016& ypeLaw=zakon&wha =Rok
Tab. 2: Da a p ocessing o de e mine de e minan s
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da a ha do no co espond o common eco-
nomic p inciples we e omi ed. Fo all upcom-
ing analyses, no mali y was assumed, and
he signi icance le el was p e-se o α = 0.05.
The co ela ion analysis wi h pa ial co ela-
ion coe icien and mul iple linea eg ession
analysis was u ilised o de e mine he e ec s
and signi icance o indi idual de e minan s. The
powe ul so wa e ool S a is ics 12 was help ul
in ou analyses. The co ela ion analysis es ed
indi idual de e minan s o see i hey we e sui -
able de e mining a iables. App op ia e de e -
minan s we e subjec ed o eg ession analysis
o de e mine he magni ude o he impac on
he capi al s uc u e and he ype o his depen-
dency (posi i e, nega i e e ec ).
The pa ial co ela ion measu es he co e-
la ion be ween wo a iables ha emains a e
con olling o he e ec s o one o mo e o he
p edic o a iables. The semi-pa ial co ela ion
is a be e indica o o he p ac ical ele ance o
a p edic o because i is scaled ela i e o he
o al a iabili y in he esponse a iable. The
gene al pu pose o mul iple eg essions is o
lea n mo e abou he ela ion be ween se e al
p edic o a iables and he esponse a iable.
Ou lie s (ex eme cases) can se iously bias he
esul s o eg ession analyses, and he e o e
hey should be de ec ed and deal wi h app o-
p ia ely (Hill & Lewicki, 2007).
3. Resea ch Resul s
3.1 Sample Analysis o O iginal Da ase o
Capi al S uc u e
Fig. 1 and Tab. 3 indica e ha he e a e emo e
alues ha a e caused by nega i e equi y. The
alues o capi al s uc u e (CS) ange om
−4.5 o 70, showing ha some companies ha e
70 imes mo e deb han equi y. F om a ma ke
poin o iew, unde akings wi h nega i e equi y
should no unc ion a all. This sugges s ha
company is wo king on he i a ional economic
Fig. 1: Sample analysis o o iginal da ase o capi al s uc u e
Sou ce: own (S a is ics 12 so wa e)
Va iable
Sample s a is ics o o iginal CS
NA e . Med. Min Max S d.
de ia ion
Va ia ion
coe . Skew. Ku .
CS 1,162 1.169 0.473 −4.549 70.197 4.681 400.136 10.047 114.714
Sou ce: own (S a is ics 12 so wa e)
Tab. 3: Sample analysis o o iginal da ase o capi al s uc u e
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Finance
p inciples. Gene ally speaking, hese unde ak-
ings pe sis only because i is he in e es o
ano he pa y; e.g., a pa en company ha sub-
sidises addi ional capi al o i s subsidia y, such
as in he o m o loans.
In iew o he abo e indings and he a ea
o examina ion o he capi al s uc u e, his pa
o he companies wi h nega i e equi y was
excluded om he sample popula ion. Only
da a anging om he unde s andable 0 o 1
a e conside ed in he ollowing analyses ( hese
companies we e ma ke ed as ou lie s), spe-
ci ically 13.7% o companies ac oss all sec o s.
O he ou lie s we e de ec ed o ROE analyses
(companies wi h a alue highe han 5 a e no
coun ed) and AG analyses (companies wi h
a alue highe han 8 a e no coun ed).
Sample dis ibu ion and o he sample cha -
ac e is ics o he cleaned da ase a e illus a ed
in he ollowing Fig. 2 and Tab. 4. This able
also shows he minimum and maximum limi s,
a an in e al (0–1), which co esponds o he
modi ied da ase . The a e age alue o capi al
s uc u e is highe han he median. These
qua iles show ha mo e han 50% o compa-
nies ha e an indeb edness o less han 50%;
i.e., mos companies p e e equi y inancing.
This con i ms he le skew o he dis ibu ion
o CS. I seems ha selec ed companies do no
p e e deb . This hypo hesis will be es ed in he
ollowing subchap e .
3.2 Ve i ica ion o S a ed Hypo hesis 1 (H1)
H1: The beha iou o Czech companies con-
i ms he p e e ence o deb inancing o e
equi y. This beha iou is he same ac oss
sec o s.
This chap e es s his hypo hesis. Fi s , le
us es he hypo hesis ha he mean capi al
s uc u e is highe han 0.5, ega dless o he
selec ed sec o . As no mali y is assumed, one
sample - es wi h = −7.74 and p- alue a
Fig. 2: Sample analysis o modi ied da ase o capi al s uc u e
Sou ce: own (S a is ics 12 so wa e)
Va iable
Sample s a is ics o modi ied CS
NA e . Med. Low.
qua .
Up.
qua .
Qua .
ange
S d.
de ia ion
Va .
coe . Skew. Ku .
CS 1,012 0.429 0.401 0.181 0.680 0.499 0.290 67.656 10.047 −1.132
Sou ce: own (S a is ics 12 so wa e)
Tab. 4: Sample analysis o modi ied da ase o capi al s uc u e
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Finance
The beha iou o du a ion, he second
weakly signi ican de e minan , shows ha
olde i ms ha e mo e e ained ea nings and
a e he e o e mo e likely o inance hemsel es
wi h equi y han wi h deb . Based on Tab. 1, du-
a ion is classi ied as signi ican by eigh s udies
and i s posi i e e ec is e ealed by Belas e al.
(2018) and P ášilo á (2012).
The no -signi ican g oup includes only one
de e minan – size. The size o he en e p ise
is no impo an when he Czech company is
deciding on he capi al s uc u e. The e exis jus
a small posi i e dependence o he company
size on he indeb edness. The nonsigni icance
o company size is he ou come o o he s ud-
ies as well, e.g., Delikanli (2020) and F ank and
Goyal (2007). Ne e heless, a my iad o s udies
classi ies size as he signi ican de e minan .
The mos ecen ones a e Chand a e al. (2021),
Gu usamy (2021), Feny es e al. (2020), Dokulil
e al. (2020), and Menon e al. (2020). Posi i e
dependence on company size is shown by
Jawo ski and Cze wonka (2021), Balios e al.
(2016), Bay akdo oglu e al. (2013), and Baue
(2004). On he o he hand, he nega i e co -
ela ion be ween size and indeb edness is he
ou come o Dawa (2014) and P ášilo á (2012).
In he hi d and he las le el o pe o med
capi al s uc u e s udy, a linea eg ession model
has been buil and he ela ionships be ween
indi idual de e minan s ha e been examined.
Fishe F- es con i med model sui abili y; ne -
e heless, he alue o he index o de e mina-
ion shows ha his model is inapp op ia e o
p edic ion making. The mu ual ela ionship
be ween ROA and ROE was explained in he
p e ious pa ag aph. O he s ongly co ela ed
de e minan s a e du a ion and size. Businesses
usually expand o e ime; he e o e, olde busi-
nesses end o be la ge . As a capi al s uc u e
de e minan du a ion should be p e e ed o e
size, because o he low in luence o size on
indeb edness. In addi ion, i was ound ha he
de e minan s o angibili y and asse g ow h ha e
a mu ual ela ionship wi h all o he de e minan s.
As hey a e dependen on o he de e minan s,
hei u ilisa ion can nega i ely a ec eg ession
analysis esul s. I was in es iga ed whe he hei
adding o omission would a ec ou eg ession
esul s and luckily bo h models we e iden ical in
sui abili y and p edic ion powe .
Las bu no leas , a se o ecommenda-
ions o he inancial manage s and c edi o s
is p esen ed.
1. Financial manage s should include mo e
deb inancing in he capi al s uc u e due o
he possibili y o ax shield u ilisa ion.
One o ou indings s a es ha Czech
companies p e e equi y o e deb . Howe e ,
equi y is gene ally mo e expensi e capi al han
deb and due o in o ma ion asymme y en e -
p ise manage s do no know abou i . Cos s
o equi y a e he so-called implici oppo uni y
cos s and hey a e no appa en in he inancial
s a emen s, unlike, o example, he in e es on
loans. Oppo uni y cos also includes u ili y o
economic bene i and indi idual loss. S udies
like his can p o ide s ong in o ma ion o inan-
cial manage s and he e o e, hey will bene i
om cheape o eign capi al mo e e icien ly.
2. C edi o s should sea ch h ough signals in-
dica ing high indeb edness.
High indeb edness o a company can be
expec ed, when i s ROA is low and angibil-
i y oge he wi h asse g ow h a e high, as
ou analyses p o e. Tangibili y is de ined by
he high sha e o ixed asse s in o al asse s.
The leng h o ime on he ma ke also a ec s
he company’s capi al s uc u e. Fo example,
s a -ups end o ha e mo e deb han olde
companies, cause hey can u ilise hei e ained
ea nings. The e ec o he size is no signi ican
in he Czech en i onmen .
Conclusions
Op imal capi al s uc u e, as a s a egic ask o
inancial managemen , c ea es he g ound o
he de elopmen and s abili y o any en e p ise.
The main aim o his con ibu ion is o e eal
and classi y signi ican de e minan s o capi al
s uc u e in he Czech en i onmen .
As a i s s ep, we a e pe o ming analyses
o he gene al beha iou o Czech companies
and speci ic sec o wise beha iou . S a ed
hypo heses based on he ade-o heo y a e
ejec ed; only he sec o o wholesale and e ail
ades ac s in e sely. Czech companies p e e
equi y o e deb inancing. This co esponds o
he pecking o de heo y expec ing p e e en ial
use o e ained ea nings. To inancial manag-
e s, we can ecommend conside ing ax shield
u ilisa ion and including mo e deb in he capi al
s uc u e. Due o in o ma ion asymme y, com-
panies p e e mo e expensi e equi y.
The mos impo an pa o ou con ibu ion
is de o ed o he capi al s uc u e de e minan s.
We selec he six mos equen de e minan s
o p e ious capi al s uc u e s udies: size,
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p o i abili y (ROA, ROE), angibili y, asse
g ow h, sec o , and du a ion; and we classi y
hem by hei powe o dependence wi h capi al
s uc u e. Mo eo e , we analyse mu ual ela-
ions o de e minan s and hei posi i e espec-
i ely a nega i e e ec on indeb edness.
To sum up ou ou comes, he Czech en-
i onmen capi al s uc u e is subs an ially
de e mined by angibili y and p o i cha ac e -
is ics. We conside ROA o be a mo e app o-
p ia e capi al s uc u e de e minan han ROE
because a highe ROA means a highe p o i .
Deb inancing is p e e ed by en e p ises wi h
lowe ROA. Analysed de e minan s a e s ongly
co ela ed wi h each o he ; o example, he e
is a signi ican dependence be ween company
size and i s age, and be ween ROA and ROE.
Asse g ow h has a middle s ong dependence
on all o he de e minan s; he e o e, i should
no be used oge he wi h o he de e minan s.
Ou s udy is limi ed by he da ase pe iod
and we a e no aking in o accoun inancial
s a emen s du ing he co id c isis (2020 ill now).
Ne e heless, i bene i s his s udy as well, and
signi ican de e minan s o capi al s uc u e in
he Czech en i onmen a e e ealed in s abi-
lised economic g ow h. The ollowing esea ch
will be ocused on indi idual business sec o s.
We al eady p o ed ha wholesale and e ail
ades ac di e en ly om o he en e p ises. We
will pe o m ad anced sec o wise analyses o
signi ican capi al s uc u e de e minan s and
we could add indeb edness and bank up cy
modelling as well.
Acknowledgemen s: This con ibu ion was
inancially suppo ed by he ins i u ional suppo
o he Uni e si y o Pa dubice.
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