EQUITY RECYCLING VS FINANCIAL CONSTRAINTS

Abstract

The influence of major factors on financial policy of the Russian companies is considered. The author researches process of change of an equity (recycling) in the conditions of financial con-straints. The given work tries to give the answer to a question - whether there is a redistribution of an equity in the company. The models considered in work are tested for a subject of a choice of the most adequate, from the point of view, forecasting. For each of models three kinds of specifications are estimated: pooled regression, regression with a random effect and regression with the fixed ef-fect. Task of the presented work is penetration into an essence of financial policy of the Russian companies: whether there is a dividend payout of shareholders in process an equity recycling or the received incomes go on development the companies (reinvesting). Novelty of the presented work consists in consideration an equity recycling as mechanism with which help the Russian companies direct the income of an equity on its shares repurchase and accumulations of profit for the reinvesting. Equity recycling gives the chance to reserve the companies certain level of a debt for the further use as a financing sources. Besides, influence of other sources of financing is considered in the conditions of financial constraints. The Russian companies resolve a problem of adverse selection (a choice of the cheapest sources of financing — profit). The author notices that low information asymmetry allows the companies to choose cheaper sources of financing. The mechanism an equity recycling gives the chance to the companies to regulate the debt level, actively correcting capital structure.

Keywords

• recycling
• profit
• equity
• capital structure
• financial policy
• financial constraints
• financial leverage