Determinants of Enterprises’ Capital Structure in Energy Industry: Evidence from European Union

Jacek Jaworski,Leszek Czerwonka

doi:10.3390/en14071871

Jacek Jaworski, Leszek Czerwonka

Open Access

https://doi.org/10.3390/en14071871

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Journal: Energies	Publication Date: Mar 28, 2021
Citations: 13	License type: CC BY 4.0

Affiliation: WSB Merito University in Gdańsk, University of Gdańsk

Abstract

The aim of the study is to identify the main determinants of the capital structure of energy industry companies in the European Union. The study was based on a panel of 6122 companies from 25 EU countries, operating between 2011 and 2018. The study used multiple regression analysis. We have obtained strong evidence for a positive relationship between corporate debt and tangibility and size, and a negative relationship for profitability and liquidity. The factors that also affect the share of debt in capital have turned out to be growth (positive relationship) and non-debt tax shield (negative relationship), but the statistical significance of these relationships is ambiguous. We have shown that growth of industry business risk is accompanied by an increase in corporate debt and this is a distinguishing feature of the energy industry. For country-specific capital structure determinants, we have obtained strong evidence for the negative relationship between GDP growth, the level of stakeholder rights protection, the degree of capital markets development, and indebtedness of the companies studied. There has been moderate support for the hypotheses of a positive effect of inflation, taxation, and the degree of financial institutions development. Our study has also shown a negative impact of the volume of energy consumption and the share of renewable sources in its production and a positive impact of market monopolization on the indebtedness of companies from the energy industry in the EU.

Highlights

Numerous studies, including Faisal et al [1], Mačerinskienė and Kremer-Matyškevič [2], Al-Mulali [3], Simionescu et al [4], and Hannesson [5] prove the close relationship between energy consumption and GDP growth of economies all over the world
An increase in TANG, SIZE, and growth opportunities (GROW) causes an increase in corporate debt
Profitability, liquidity, and non-debt tax shield exerts a negative influence on the share of debt in the enterprises’ capital structure

Summary

Introduction

Numerous studies, including Faisal et al [1], Mačerinskienė and Kremer-Matyškevič [2], Al-Mulali [3], Simionescu et al [4], and Hannesson [5] prove the close relationship between energy consumption and GDP growth of economies all over the world. This means that the development of the energy industry is an indication of the level of development of a particular economy, but it can significantly support this process. The state dominates as the owner of enterprises in this industry

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Discussion

Conclusion