The Determinants of Capital Structure and Optimization
The Determinants of Capital Structure and Optimization

The Determinants of Capital Structure and Optimization

Summary/Abstract: The optimal capital structure differs between companies and depends on the nature of the business, the characteristics of the business, etc. Usually when business income is higher, there is a reduction in business risk, while, on the other hand, higher profits and accumulated profits lead to an increase in investments and debt. In the research 10 companies of the power sector, representing the stock exchange index ERS 10 were examined. The following dependent variable was used: short term debt to total liabilities (STDTL). The following independent variables were used: current ratio (CR), return on capital employed (ROCE), earnings before interest taxes depreciation (EBITDA), return on assets (ROA), return on equity (ROE), the tangibility of assets (TOA), firm size (FS) and gross domestic product growth (GDP growth). The research period covered the years from 2008-2018 on a semi-annual basis. The total number of observations was 220. The main objective of the paper is to determine explanatory factors that influence the changes in short-term indebtedness and profitability.

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