The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies

Elena Alexandra Nenu, Georgeta Vintila and Ştefan Gherghina
Additional contact information
Elena Alexandra Nenu: Department of Finance, The Bucharest University of Economic Studies, 6 Piata Romana, 010374 Bucharest, Romania

IJFS, 2018, vol. 6, issue 2, 1-29

Abstract: This paper analyzes the evolution of the main theories regarding the capital structure and the related impact on risk and corporate performance. The capital structure is a dynamic process that changes over time, depending on the variables that influence the overall evolution of the economy, a particular sector, or a company. It may also change depending on the company’s forecasts of its expected profitability, capital structure being, in fact, a risk–return compromise. This study contributes to the literature by investigating the drivers of capital structure of the firms from the Romanian market. For the econometric analysis, we applied multivariate fixed-effects regressions, as well as dynamic panel-data estimations (two-step system generalized method of moments, GMM) on a panel comprising the companies listed on the Bucharest Stock Exchange. The analyzed period, 2000–2016, covers a cycle with significant changes in the Romanian economy. Our results showed that leverage is positively correlated with the size of the company and the share price volatility. On the other hand, the debt structure has a different impact on corporate performance, whether this calculated on accounting measures or seen as market share price evolution.

Keywords: capital structure; leverage; bankruptcy risk; corporate performance; fixed-effects regressions; two-step system GMM; emerging countries (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://www.mdpi.com/2227-7072/6/2/41/pdf (application/pdf)
https://www.mdpi.com/2227-7072/6/2/41/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:6:y:2018:i:2:p:41-:d:140401

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().