engleski

The Influence of the Capital Structure on the Systematic Risk of Common Stocks

The purpose of this chapter is to investigate the impact of the capital structure decisions on the systematic risk of common stocks. The research attempts to show and test the relationship between the market risk and risk that arises from financing policy decisions. Research of this relationship should lead to better understanding of the influence of the capital structure decisions on the nondiversifiable risk, so as to the better estimation of the expected systematic risk of the common stocks. It is expected that the stocks of the companies in the same risk class with higher leverage ratio will have higher covariance of the stocks rate of return with the market portfolio’s rate of return. In order to test this hypothesis multiple linear regression is used with systematic risk of common stocks as dependent variable, financial leverage as independent variable and size of the company, profitability, liquidity, operational efficiency and growth as control variables. For this purpose data from Croatian listed companies in the period of 2008 until 2012 is used.

capital structure, financial leverage, systematic risk, beta

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