EconPapers    
Economics at your fingertips  
 

The impact of liquidity on the capital structure: a case study of Croatian firms

Šarlija Nataša and Harc Martina
Additional contact information
Šarlija Nataša: Faculty of Economics, J.J. Strossmayer University of Osijek, Osijek, Croatia
Harc Martina: Institute for Scientific and Art Research Work, Croatian Academy of Science and Art, Osijek, Croatia

Business Systems Research, 2012, vol. 3, issue 1, 30-36

Abstract: Background: Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more frequently financed by their own capital and therefore were less leveraged. Objectives: The aim of this paper is to investigate the impact of liquidity on the capital structure of Croatian firms. Methods/Approach: Pearson correlation coefficient is applied to the test on the relationship between liquidity ratios and debt ratios, the share of retained earnings to capital and liquidity ratios and the relationship between the structure of current assets and leverage. Results: A survey has been conducted on a sample of 1058 Croatian firms. There are statistically significant correlations between liquidity ratios and leverage ratios. Also, there are statistically significant correlations between leverage ratios and the structure of current assets. The relationship between liquidity ratios and the short-term leverage is stronger than between liquidity ratios and the long-term leverage. Conclusions: The more liquid assets firms have, the less they are leveraged. Long-term leveraged firms are more liquid. Increasing inventory levels leads to an increase in leverage. Furthermore, increasing the cash in current assets leads to a reduction in the short-term and the long-term leverage.

Keywords: liquidity; capital structure; leverage (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.2478/v10305-012-0005-1 (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:bit:bsrysr:v:3:y:2012:i:1:p:30-36

DOI: 10.2478/v10305-012-0005-1

Access Statistics for this article

Business Systems Research is currently edited by Mirjana Pejić Bach

More articles in Business Systems Research from Sciendo
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2022-04-16
Handle: RePEc:bit:bsrysr:v:3:y:2012:i:1:p:30-36