Abstract
Kokoreva Maria Sergeevna - assistant professor, lecturer, HSE Higher School of Economics, deputy head of the school of finance, researcher of the scientific and educational laboratory of corporate finance, director of the joint educational program for the preparation of bachelors in the direction of "Economics" USU and HSE.
 E-mail: maria_kokoreva@mail.ru
 This study investigates the puzzle of zero-debt on in developing markets using a sample of firms from Eastern Europe during 2000-2013. The results of this paper are in line with the previous research of firms from developed markets. Firms that are financially constrained do not use debt as a result of credit rationing w. While financially unconstrained firms intentionally eschew debt to maintain financial flexibility and avoid underinvestment incentives. Furthermore, this study provides new insights on into unconstrained firms’ performance during different economic situations. Firms that strategically avoid debt show better financial results than levered firms.
Highlights
One of the most important puzzles in the theory of capital structure is that companies prefer to have a considerably lower amount of debt than the major trade-off theory predicts
The number of observations distributed by time, country and industry are reported in Tables 3, 4 and 5 respectively
This finding is in line with the previous research [Bessler et al, 2013]
Summary
One of the most important puzzles in the theory of capital structure is that companies prefer to have a considerably lower amount of debt than the major trade-off theory predicts. Latest studies of zero-levered firms found an unexpected fact that the number of unlevered companies has been increasing during the last 15 years; the existing theories (those of trade-off and pecking order) are not capable to explain this trend. The current research of unlevered firms has studied different factors that have an influence on the firm’s choice of capital structure (for example: [Bessler et al, 2013; Strebulaev, Yang, 2013]). Even though they draw a conclusion that some firms eschew debt for strategic decisions, they do not study the effect of economic conditions on the firm’s performance. Most research is devoted only to developed markets (the US – [Devos et al, 2012]; the UK – [Dang, 2013]) and does not fully cover developing markets.
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Schedule a callMore From: Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438
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