CAPITAL STRUCTURE DETERMINANTS OF LISTED PRIVATE AND STATE COMPANIES: EVIDENCE AND LESSONS FROM BOSNIA AND HERZEGOVINA

Abstract

Purpose. The purpose of this paper is to determine and analyze the determinants of the capital structure of joint-stock companies in Bosnia and Herzegovina that are listed on the Banja Luka Stock Exchange. This study will answer the question as to which factors determine the capital structure of BiH companies and whether existing financial theories of the capital structure hold true in that context. The main research objective is to estimate the effects of a firm’s level determinants on its capital structure measures in different ownership structures. Those findings will certainly advance our understanding of listed companies financing behavior. Methodology. For the research, we took into account firm-specific characteristics and divided joint-stock companies into private and state-owned. The results of the research show that the capital structure of these two groups of enterprises is differently affected by individual determinants. Findings and implications. While state-owned enterprises rely more on borrowed resources to finance both short-term and long-term assets, private enterprises even finance part of their short-term assets with their own capital. However, the most important determinant in both groups of enterprises is the share of inventories in short-term assets, which confirms that short-term liabilities, i.e. free sources of financing in the form of liabilities to suppliers are the determinant that most positively affect the indebtedness of all enterprises. Unlike previous research that observed enterprises according to their size or affiliation to individual industries, the focus of our research is enterprises of different ownership structures. The empirical statistical results provide basis for logical conclusion and appropriate policy implications. The study points to the specifics of the capital structure in private and publicly listed joint-stock companies. The stated opposite influence of certain ratios on the indebtedness of the enterprises is explained by a number of factors. Limitations. This study focuses only on the presentation of the recent indicators of capital structure of listed companies - listed on the Banja Luka Stock Exchange, which is one of its major limitations. The limitation of this search is the sample size which can be considered low. Further research may be conducted by using other capital markets to explore more information regarding the effect of the variables affecting the capital structure. In addition, further research may also be conducted by using other proxies or by adding more variables, sample size, and research period to get a better result. Originality. The study is an original research paper. It has not been published in any other peer-reviewed journal not under consideration for publication by any other journal. The paper adds to the existing literature on Bosnia and Hezegovina by giving an overview of recent developments in the flexi purity concept, pointing out the areas that require policy response.

Keywords

• capital structure
• tangible assets
• debt
• private and state companies