Corporate capital structure: the case of large Croatian companies

Figures & data

Table 1. Central predictions of two dominant capital structure theories.

Variables	Trade-off theory	Pecking order theory
Profitability	Positive	Negative
Tangibility	Positive	Positive
Size	Positive	Negative
Non-Debt tax shields	Negative	-
Growth (opportunity)	Negative	Positive
Earnings volatility	Negative	Negative
Liquidity	Positive	Negative

Source: Authors’ expectations according to theoretical assumptions.

Table 2. Descriptive statistics.

Variable	Mean	Standard Deviation	Minimum	Maximum
Leverage	0.655	0.254	0.000	2.213
Tangibility	0.444	0.247	0.000	1.000
Return on assets	0.100	0.127	-1.141	0.950
Sales growth	2.008	31.153	-1.000	921.668
Liquidity	3.712	43.029	0.004	1360.000
Size	1.66e+07	2.19e+07	48840	1.40e+08
Non-debt tax shield	0.054	0.061	0.000	0.698
GDP	6017.42	6017.42	6017.42	6017.42
Inflation	3.74	1.17	1.02	6.09
Domestic credit provided by banking sector	65.03	11.09	45.57	82.20

Source: Authors’ calculations.

Table 3. Pairwise correlations.

Variable	Leverage	Tangibility	Return on assets	Sales growth	Liquidity	Size	Non-debt tax shield	GDP	Inflation	Domestic credit provided by banking sector
Leverage	1.000
Tangibility	0.081	1.000
Return on assets	-0.065	0.026	1.000
Sales growth	-0.035	0.008	-0.045	1.000
Liquidity	0.383	0.092	-0.016	-0.003	1.000
Size	0.059	0.155	-0.008	0.041	0.032	1.000
Non-debt tax shield	0.041	0.094	0.055	-0.017	0.004	0.014	1.000
GDP	-0.045	0.066	-0.005	-0.062	0.030	0.236	0.087	1.000
Inflation	0.018	-0.024	-0.100	0.102	-0.040	0.007	-0.024	0.175	1.000
Domestic credit provided by banking sector	-0.038	0.074	-0.016	-0.102	-0.051	0.244	0.110	0.509	-0.181	1.000

Source: Authors’ calculations.

Table 4. Dependent and explanatory variables and their measures.

Variables	Measures
Leverage	Ratio of total liabilities to total asset
Tangibility	Ratio of fixed asset to total asset
Growth^a (in sales)	(Salest – Salest-1)/Salest-1
Profitability	Ratio of EBITDA to total asset
Liquidity (Current ratio)	Ratio of current asset to current liabilities
Size	Total asset
Non-debt tax shield	Ratio of depreciation to total asset
Gross domestic product per capita	GDP per capita
Inflation	Inflation, GDP deflator (annual %)
Domestic credit provided by banking sector	Domestic credit provided by banking sector as a percentage of GDP

^a Calculation of possibly better proxies for growth opportunities - such as Tobin’s Q, was not feasible due to the lack of necessary capital market data.

Source: Authors’ definitions according to existing empirical studies.

Table 5. Determinants of capital structure (GMM system estimator).

	Model 1	Model 2
	Dependent variable: Leverage	Dependent variable: Leverage
Explanatory variables	Coefficients (Standard errors)^a	Coefficients (Standard errors)^a
Constant	0.148 (0.157)	0.002 (0.1797)
Leverage(t-1)	0.170*** (0.071)	0.2142*** (0.067)
Tangibility	-0.122 (0.354)	-0.327 (0.427)
Profitability (ROA)	-0.0035* (0.002)	-0.0035* (0.002)
Growth	-0.022*** (0.008)	-0.017* (0.010)
Liquidity	0.027*** (0.004)	0.029*** (0.005)
Size	-0.001* (0.005)	-0.001** (0.005)
Non-debt tax shield	-0.002 (0.003)	-0.001 (0.003)
GDP		-0.000 (0.000)
Inflation		0.0162* (0.009)
Domestic credit provided by banking sector		0.0039** (0.002)
Number of instruments	15	18
Sargan test (p-value)	0.2355	0.4048
First-order correlation (m1) (p-value)	0.0599	0.0488
Second-order correlation (m2) (p-value)	0.1623	0.1279

^a ***, ** and * indicate significance at the 1%, 5% and 10% levels respectively. Standard errors are in parentheses.

Source: Authors’ calculations.