Abstract
Research background: Entities operating in the field of development activities show significant specifics, including a high level of indebtedness. Given the nature of development projects, which are long-term, and their financial complexity, companies take, at the same time, high risks. Therefore, there is need of a high standard of financial management and risk management in this type of companies. Purpose of the article: The aim of the paper was to provide information regarding return on equity and point out the risk factors of financial management. A partial aim of the conducted preliminary research was to identify and evaluate selected differences in financial management of national companies and foreign-controlled companies. Methods: The research was conducted as mixed research. It started with the undertaking of qualitative research focused on textual analysis of the text and collection of selected relevant quantitative data. For evaluation, we used INFA methodology, which links financial controlling and risk controlling indicators. The data under investigation were those related to the evaluation of return on equity in relation to risks taken. The indicators of the assets, self-financing ratio and debt ratio were assessed, including the assessment of the impact of these factors on return on equity and taken risks. Findings & Value added: The research provides new knowledge regarding the extent to which equity capital is used in the financial management of companies operating in the Czech Republic in development activities. The results indiciate that companies under foreign control and domestic companies show differences in financial structure and financial stability indicators, as well as in the effectiveness of using their capital.
Highlights
Overall, the Covid-19 pandemic is having an adverse effect on corporate cash flows (Ding et al, 2021)
The results indicate that national companies show better solvency
The research performed, which is the basis for subsequent quantitative research, indicates the following assumptions
Summary
The Covid-19 pandemic is having an adverse effect on corporate cash flows (Ding et al, 2021). If we are talking about the construction industry, it is a sector in which financial leverage is used (Oh & Yoon, 2020) This sector is dependent on the availability of credit (Oh & Yoon, 2020), a fact stemming from the high capital intensity of construction. This strategy, i.e., the leverage strategy, becomes prohibitively expensive in situations where the cost of equity and debt issuance is high (Chen et al, 2021). Existing studies confirm the fact that companies with foreign owners tend to use debt financing more, as their role as a manager is far more separated from that of a business owner (Růčková and Heryán, 2015)
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