Factors Influencing Capital Structure of Russian Companies

Selecting the equity-debt ratio to ensure efficient operation of a company is a vital part of management. This problem has become crucial with the onset of the 2008 global financial crisis, when excessive debt burden became critical for many Russian companies. Aim. This study aims to determine the correlation between the financial performance and the capital structure of Russian companies. Tasks. This study analyzes the formation of traditional and modern theories of capital structure in developed and developing markets, determines the internal and external factors of capital structure formation specific to developing markets (including the Russian market), develops statistical models relevant to this objective, and interprets the results obtained. Methods. Hypotheses on the existence of correlation between financial performance and capital structure are developed and tested using data on Russian companies over a three-year period (2010-2012). A selection of 432 firms was used in the study. A Wald test, Breusch-Pagan test, and Durbin-Wu-Hausman test areconducted to substantiate the selection of linear regression models with six-factor variables. Results. Russian companies are characterized by a low proportion of long-term funding in the capital structure, with short-term liabilities exceeding long-term ones. The level of ownership concentration only affects the formation of the overall level of debt. Compared with the other factors in the model, its effect is insufficient. This is the first study that uses a quantitative variable rather than a binary one to characterize the ownership structure. The direct correlation between the overall debt level and the level of ownership concentration is empirically proven. However, the correlation coefficient suggests that this relationship is rather vague. Conclusion. Companies in the Russian market tend to retain the hierarchy theory in the selection of funding sources. They attract a lot of debt financing at the onset, and the debt burden at this stage is 3.5%-6.5% higher than in other periods. There are no universal criteria for capital structure formation. Each company requires a customized approach that considers the internal and external factors specific to the company.

capital structure, determinants of capital leverage, funding sources, ownership concentration, debt burden, hierarchy theory, структура капитала, детерминанты финансового рычага, источники финансирования, концентрация собственности, долговая нагрузка, теория иерархии

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