Acta Univ. Bohem. Merid. 2015, 18(2):32-41 | DOI: 10.1515/acta-2016-0003908

The Relationship between Capital Structure and Profitability of the Limited Liability Companies

Jana Steklá, Marta Gryčová
Czech University of Life Sciences Prague

Keywords: Capital structure, profitability, limited liability companies, statistics, correlation

Capital structure is very important, especially the decision which concern with this problem, because the profitability of a company is directly affected by such decision. The successful choice and use of capital is one of the key components of the enterprises financial strategy. This means that it is the vital to pay attention and proper care capital structure. The aim of this paper is to investigate the relationship between capital structure and profitability of the limited liability companies from an agricultural sector in the Czech Republic over the past six year period from 2008 to 2013. Data was obtained and processed from the database of enterprises of Albertina and was analyzed by using descriptive statistics, i.e. mean, median, variation range, standard deviation, coefficient of variation, skewness, kurtosis, and correlation analysis to find out the association between the variables. The results of this paper describe a small negative correlation between the debt ratios and profitability ratios.

JEL classification: G32, Q14

Published: September 6, 2016  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
Steklá, J., & Gryčová, M. (2015). The Relationship between Capital Structure and Profitability of the Limited Liability Companies. Acta Universitatis Bohemiae Meridionalis, 18(2), 32-41. doi: 10.1515/acta-2016-0003
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Abor, J. (2005). The Effect of Capital Structure on Profitability: An Empirical Analysis of Listed Firms in Ghana. Journal of Risk Finance, 6(5), 438-445. Go to original source...
    2. Anderson, T. W. (2011). The Statistical Analysis of Time Series. New York: John Wiley & Sons.
    3. Bachman, L. F. (2004). Statistical Analyses for Language Assessment. Cambridge: Cambridge University Press. Go to original source...
    4. Brigham, E. & Ehrhardt, M. (2013). Financial Management - Theory & Practice. 14th ed. Mason: Cengage Learning.
    5. Brander, J. A. & Lewis, T. R. (1986). Oligopoly and Financial Structure: The Limited Liability Effect. American Economic Review, 76(5), 956-970.
    6. Brounen, D. & Eichholtz, P. M. A. (2001) Capital Structure Theory: Evidence from European Property Companies' Capital Offerings. Real Estate Economics, 29(4), 615-632. Go to original source...
    7. Margaritis, D. & Psillaki, M. (2010). Capital Structure, Equity ownership and Firm Performance. Journal of Banking & Finance, 34(3), 621-632. Go to original source...
    8. Faulkender, M. & Wang, R. (2006). Corporate Financial Policy and the Value of Cash. Journal of Finance, 61(4), 1957-1990. Go to original source...
    9. Gill, A., Biger, N. & Mathur, N. (2011). The effect of capital structure on profitability: Evidence from the United States. International Journal of Management, 28(4), 3-15.
    10. Glen, J. D. & Pinto, B. (1994). Debt or Equity? How Firms in Developing Countries Choose. Washington: World Bank Publications. Go to original source...
    11. Guthmann, H. G. & Dougall, H. E. (1955). Corporate Financial Policy, 3th ed. New York: Prentice-Hall.
    12. Kester, W. C. (1986). Capital and Ownership Structure: A Comparison of United States and Japanese Manufacturing Corporations. Financial Management, 15(1), 5-15. Go to original source...
    13. Jankowicz, A. D. (2005). Business Research Projects. 4th ed. Hampshire: Thomson Learning.
    14. Leavy, A. M. (2004). Indexing Distributions of Data: Preservice Teachers' Notions of Representativeness. School Science and Mathematics, 104(3), 119-134. Go to original source...
    15. Lewis, M. (2012). Applied Statistics for Economists. New York: Routledge.
    16. Maksimovic, V. (1988). Capital Structure in Repeated Oligopolies. RAND Journal of Economics, 19(3), 389-407. Go to original source...
    17. Miller, M. H. (1977). Debt and Taxes. Journal of Finance, 32(2), 261-275. Go to original source...
    18. Modigliani, F. & Miller, M. H. (1958). The Cost of Capital Corporation Finance and the Theory of Investment. American Economic Review, 48(3), 261-297.
    19. Modigliani, F. & Miller, M. H. (1963). Corporate Income Taxes and the Cost of Capital: A Correction. American Economic Review, 53(3), 433-443.
    20. Pandey, I. M. (2009). Capital Structure Planning and Policy. Financial Management, 332-333.
    21. Peterson, P. P. & Fabozzi, F. J. (1999). Analysis of Financial Statements. 1st ed. New York: Wiley.
    22. Peterson, M. A. & Rajan, R. G. (1994). The Benefits of Lending Relationship: Evidence from Small Business Data. Journal of Finance, 49(1), 3-37. Go to original source...
    23. Rajan, R. G. & Zingalas, L. (1995). What Do We Know about Capital Structure? Some Evidence from International Data. Journal of Finance, 50(5), 1421-1460. Go to original source...
    24. Saunders, M., Lewis, P. & Thornhill, A. (2009). Research Methods for Business Students. 5th ed. Harlow: Prentice Hall.
    25. Taub, A. J. (1975). Determinants of the Firm's Capital Structure. Review of Economics and Statistics, 57(4), 410-416. Go to original source...
    26. Titman, S. & Wessels, R. (1988). The Determinants of Capital Structure Choice. Journal of Finance, 43(1), 1-19. Go to original source...
    27. Velnampy, T. & Niresh, J. A. (2012). The Relationship between Capital Structure & Profitability. Global Journal of Management and Business Research, 12(13), 66-73.
    28. Welch, I. (2011). Two Common Problems in Capital Structure Research: The Financial-Debt-To-Asset Ratio and Issuing Activity Versus Leverage Changes. International Review of Finance, 11(1), 1-17. Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content