Industry and Size Effect in Profitability-Capital Structure Relation: Empirical Evidence from Poland

Julia Koralun-Bereźnicka () and Dorota Ciołek ()
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Julia Koralun-Bereźnicka: University of Gdansk, Faculty of Management
Dorota Ciołek: University of Gdansk, Faculty of Management

Journal for Economic Forecasting, 2018, issue 1, 93-107

Abstract: This study aims at verifying the significance and the direction of the way profitability affects capital structure of private firms in Poland. We explore the relationship in two cross-sections: across industries and across size groups of firms. The main issue addressed in this study is whether the way profitability impacts financial leverage is industry- and (or) size dependent. In order to answer this question, we estimate panel data models with interactions between variables for selected profitability measures. The study contributes to the existing literature mainly by exploring the indirect effect of industry and firm size as factors responsible for the variability of the relation between profitability and corporate capital structure. Findings provide evidence that the profitability-leverage relationship is affected both by the firm size and its industrial classification, with the stronger impact of the latter.

Keywords: financial leverage; profitability; firm size; industry factor; panel data (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2018:i:1:p:93-107

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