engleski

The impact of liquidity on the capital structure: Case study of Croatian firms

The aim of this paper is to investigate the impact of liquidity on the capital structure of Croatian firms. For the economy of every country it is important to investigate whether liquid firms are less leveraged or just the opposite, firms that are more liquid access to financial markets more easily and are more leveraged. Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more financed by its own capital and therefore were less leveraged. In order to examine the relationship between liquidity and capital structure in Croatia, a survey is conducted on a sample of 1058 Croatian firms. Pearson correlation coefficient is applied to test for the relationship between liquidity ratios and debt ratios, the share of retained earnings to capital and liquidity ratios and the relationship between the structure of current assets and leverage. The results showed that in Croatia there is a negative correlation between liquidity and capital structure. The more liquid assets firms have, the less they are leveraged. Furthermore, increasing the cash in current assets leads to a reduction in short-term and long-term leverage. Share of retained earnings in capital is not significantly correlated with any indicator of liquidity.

liquidity ; capital structure ; leverage

nije evidentirano