engleski

The importance of company’s capital structure in financial relations: The dynamic panel model

A survey conducted on the sample of companies from the Republic of Croatia for the period from 2009 to 2019 using the panel model GMM estimation found a significant negative relationship between capital structure and profitability indicators. With these results, Croatian companies are placed alongside other companies from countries that belong to the group of developing countries. Namely, in developed countries, such a relationship has been proven to have a positive sign. For Croatian companies, this means that any further usage of debt as a source of financing will lead to a decline in profitability measured by ROA and ROE indicators. Consequently, this means that domestic companies cannot make significant use of the current situation of low interest rates on loans, and therefore lag behind in terms of the level of investments made. Indirectly, the validity of theories of capital structure formation on the Croatian market was tested, and it was proved that the behavior of Croatian companies can best be described by settings of the Trade-off theory of capital structure. Both obtained results served to indicate the problem of insufficient harmonization of the capital markets of developed EU countries and Croatia with all the repercussions that arise from it.

Capital structure ; financial relations ; the panel model GMM estimation ; Croatia

This paper is a result of scientific – research projects “Impact of Monetary and Fiscal Policy on Financial Markets and Institutions”, “Accounting for the Future, Big Data and Economic Measurement” and “The Determinants and Challenges of Competitiveness” supported by the Faculty of Economics and Tourism „Dr. Mijo Mirković“, Juraj Dobrila University of Pula. Any opinions, findings, and conclusions or recommendations expressed in this paper are those of the authors and do not necessarily reflect the views of the Faculty of Economics and Tourism „Dr. Mijo Mirković“, Pula.