Abstract

The aim of this paper is to determine the impact of funding sources on liquidity of companies in energy sector in the Czech Republic. With the purpose to fulfill the aim, we examine existence and character of relationship between selected financial factors (debt equity ratio, share of capital for consideration to total assets, return on equity, share of fixed assets to total assets, share of earnings before interest and taxes to total assets, equity ratio) and liquidity of the companies in energy sector in the Czech Republic. The existence of relationship between financial factors and liquidity of companies is tested by correlation analysis and generalized method of moments called GMM method. It is expected a positive relationship between liquidity and funding sources in energy sectors in the Czech Republic. Companies with high liquidity are more credible and less risky clients for creditors and can obtain the necessary financial support under more favorable and cheaper terms.

Highlights

  • Myers (2001) argues that agency effects of various kinds may create important reasons for holding liquid assets with the further implications of different patterns of corporate liquidity depending on capital structure or other firm characteristics

  • With the purpose to fulfill the aim, we examine existence and character of relationship between selected financial factors and liquidity of the companies in energy sector in the Czech Republic

  • With the purpose to fulfill the aim, we examined existence and character of relationship between selected financial factors and liquidity of the companies in energy sector in the Czech Republic

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Summary

Introduction

Myers (2001) argues that agency effects of various kinds may create important reasons for holding liquid assets with the further implications of different patterns of corporate liquidity depending on capital structure or other firm characteristics. He believed that holding liquid assets will be important for companies facing growth opportunities and the expected return fluctuates over time. Firms hold a certain amount of liquidity in during their activities to be able to meets its obligations on time. For this reason, Saleem and Rehman (2011) argues that liquidity management is very important for each company in order to maintain the ability to pay its obligations properly and on time

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