MODELLING OF COSTS OF CAPITAL IN SLOVAK ENTERPRISES
MODELLING OF COSTS OF CAPITAL IN SLOVAK ENTERPRISES

Summary/Abstract: The paper deals with the issue of the corporate cost of capital and its calculation.The main aim of the article is to identify significant factors affecting the value of the costs ofcapital in the Slovak Republic and to form a model that would allow Slovak companies tocompute the value of the costs of capital. We identify the main parameters of our potentialmodel considering six relevant studies that were performed in foreign countries, accepting onlythose determinants that were applicable in Slovak economic conditions. Then the values ofselected parameters are calculated for 32,127 companies of our database and the weightedaverage costs of capital of the entities in the database, considering the calculation of costs ofequity using the CAPM model modified for non-American markets and costs of debt. We usethe regression analysis to compute the statistical characteristics of the econometric model. Wefound out that the significant parameters to be included in the model are levered beta, value ofequity, leverage, corporate size, long-term debt capital to total assets, return on assets and oninvestments, legal form, SK NACE and region. Using the significance F-test and Pearson chisquare test we can claim, that there is a statistically significant relationship between thecorporate costs of capital and the legal form and SK NACE classification and we can concludethat there is a statistical significance of the constructed model of the costs of capitalquantification. This model can be used to compute the costs of capital of the individualcompanies in the Slovak economic conditions.

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