Abstract
The enterprise capital structure is influenced by internal factors, i.e., the share of fixed assets in total assets, the size and growth of the enterprise, its liquidity and profitability, and the non-debt tax shield. The literature shows that external factors – macroeconomic and institutional specifics of enterprises’ environment – may shape the strength and direction of these dependencies. The main aim of this article is to identify the relationship between external factors and the impact of internal determinants on the capital structure. The study includes the meta-analysis of papers which provide information on the relationship between internal factors and the capital structure for 35 countries. The study includes the papers published after 2000 whose research covered the period 1993–2017. A statistically significant relationship between four external factors (inflation, G.D.P. growth rate, G.D.P., index of protection of the creditors and debtors rights) and the strength and direction of the impact of internal factors on the capital structure has been found. In addition, the unambiguously negative impact of two internal factors (liquidity and profitability of the enterprise) on indebtedness was diagnosed. It also reveals that the pecking order theory constitutes a strong theoretical basis for research into the capital structure of enterprises.
Highlights
The selection of sources of finance for the company is one of the most important financial decisions taken by managers of contemporary enterprises
The literature indicates that external factors may affect the capital structure directly, and indirectly – by shaping the strength and direction of the influence of internal determinants
The main aim of this article is to identify the relationship between external factors and the impact of internal factors on the capital structure
Summary
The selection of sources of finance for the company is one of the most important financial decisions taken by managers of contemporary enterprises. The capital structure shaped in this way significantly affects the level of financial risk and the cost of capital which are direct determinants of the results achieved In this regard previous studies indicate two groups of factors influencing the decisions of enterprises. Theories concerning cause-and-effect relationships between external factors and the capital structure of the enterprise have not yet been developed in the literature It means that from the point of view of the contemporary knowledge, any attempt to aggregate the current empirical research may contribute to the inclusion of these relationships in the theoretical model. The obtained results provide a strong ground for indicating the capital structure theory which best explains the financial decisions of enterprises They create a premise for the development of a theoretical model explaining the relationship between external and internal determinants of the capital structure
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