Determinants of Enterprises’ Capital Structure in Poland: Evidence from Warsaw Stock Exchange

Abstract

The aim of the paper is to identify factors that affect the financing structure of Polish companies listed on the Warsaw Stock Exchange in the period 1998–2012. In the first part of the paper the modern theories of capital structure are reviewed and main determinants of this structure are identified. The second part provides empirical verification of the relationship between debt and found factors using panel models. The capital structure of studied enterprises measured by the total debt ratio is most adequately explained by the pecking order theory. The increase in the share of fixed assets in total assets, profitability, liquidity and company size influences the reduction of its debt. The non-debt tax shield affected the debt level differently from the pecking order theory. The positive relationship between non-debt tax shield and debt corresponds to the agency theory. While a large number of studies conducted in other countries confirm the significance of the impact regarding the above factors on the long-term debt ratio, in Poland a similar relationship is not noticeable. Long-term debt is determined only by the share of fixed assets in total assets. It indicates the importance of short-term debt in the financing of Polish enterprises.