Does Capital Structure Drive Profitability in the Energy Sector?

Monika Wieczorek-Kosmala, Joanna Błach and Iwona Gorzeń-Mitka
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Monika Wieczorek-Kosmala: College of Finance, University of Economics in Katowice, 1 Maja 50, 40-287 Katowice, Poland
Joanna Błach: College of Finance, University of Economics in Katowice, 1 Maja 50, 40-287 Katowice, Poland
Iwona Gorzeń-Mitka: Faculty of Management, Czestochowa University of Technology, J.H. Dąbrowskiego 69, 42-201 Częstochowa, Poland

Energies, 2021, vol. 14, issue 16, 1-15

Abstract: This paper investigates the factors that determine the profitability of non-listed energy firms from four central European countries: Hungary, Poland, Slovakia, and the Czech Republic. We apply the regression analysis, on a large panel of firm-year observations for the 2015–2019 timespan, to verify the hypothesis on the inversed relationship between leverage and profitability of the companies performing in the energy sector. Our results support the inversed relationship for debt in total and long-term debt, which are consistent with the assumptions of the pecking order theory. However, for short-term debt, we have found a direct relationship, which confirms the assumptions of the trade-off theory of capital structure. Our work contributes to the existing debate on the interplay between financial leverage and profitability, by providing evidence for a large panel of non-listed firms, from a single sector (energy)-oriented perspective.

Keywords: capital structure; financial leverage; profitability; energy sector (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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