The Impact of Debt Policy on Financial Performance of Romanian Listed Companies

Nicoleta Bărbuţă-Mişu and Andreea Rusu ()
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Andreea Rusu: Dunarea de Jos University of Galati, Romania

Economics and Applied Informatics, 2014, issue 1, 29-38

Abstract: The purpose of this paper is to study the impact of listed companies’ indebtedness on their financial performance. Theoretical research was relied on the specialty literature concerning the analysis of the capital structure and financial structure of the company based on calculation of the financial structure ratio and financial leverage. This paper focuses on the analysis of debt policy impact on companies’ financial performance using the financial leverage method. The financial leverage method reflects the influence of debt policy on company’s return on equity, as well as the ways it engages loans to finance operating assets so it can get higher return on equity. The main aim of this paper is to investigate and analyze the determinants of leverage effect and financial structure of companies that are operating in Romanian food industry, namely manufacturing of dairy products. The conclusion that emerges in this study is the importance of choosing and establishing funding sources by an enterprise, according to funding costs, in order to obtain the optimal combination between external financing resources and internal funding.

Keywords: Return on assets; Return on equity; Financial leverage; Interest rate; Capital structure; Internal and external funding; Financial risk (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ddj:fseeai:y:2014:i:1:p:29-38

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