The Distorted Corporate Capital Structure: Ukrainian Case

  • Authors

    • Vladyslav Zymovets
    • Galina Yershova
    • Anna Kornyliuk
    • Raisa Shynkarenko
    2018-10-13
    https://doi.org/10.14419/ijet.v7i4.8.27335
  • bank loans, corporate debt, corporate finance, crowding-out effect, equity, government debt, interest rate.

  • Abstract

    Debt and capital are two possible alternative forms of business financing. So the debt and equity ratio shows the choice of management of an enterprise between available financial instruments, taking into account the risk and expected capital expenditures. In this paper the trends in the capital structure of the non-financial corporations in Ukraine are considered. It is argued that the corporate capital structure in Ukraine is distorted. The following specific capital structure features are determined: excessive aggregate NFC indebtedness, excessive share of non-financial debt in total capital, low bank loans’ share in the capital structure (less than 15%), abnormally high small business indebtedness, weak investment activity. We proved that the deepening of the government indebtedness on the background of low monetization level caused structural changes in the financing of business in Ukraine. We also show that the deleverage process caused by the intentional or forced reduction of bank lending was partly compensated by the inflows of capital and loans from offshore companies and shadow economy.

     

     

     

  • References

    1. [1] Bolton P., Freixas X. (2006) Corporate Finance and the Monetary Transmission Mechanism // The Review of Financial Studies . – V. 19 № 3 – https://www0.gsb.columbia.edu/faculty/pbolton/transmission.pdf/ p.829

      [2] Corporate Finance and Economic Activity in the Euro Area, Structural Issues // ECB Occasional Paper Series. - 2013.- â„– 151.- https://www.ecb.europa.eu/pub/pdf/scpops/ecbocp151.pdf.

      [3] Fama, E., and K.R. French (2002) Testing trade-off and pecking order predictions about dividends and debt. Review of Financial Studies 15, 1-33. http://epge.fgv.br/we/MD/FinancasCorporativas/2006?action=AttachFile&do=get&target=famafrench02.pdf

      [4] Global Financial Stability Report. IMF. October 2015. Vulnerabilities, Legacies, and Policy Challenges. Risks Rotating to Emerging Markets. http://www.imf.org/External/Pubs/FT/GFSR/2015/02/pdf/text.pdf

      [5] Global Investmsnt Monitor. – URL: http://unctad.org/en/PublicationsLibrary/webdiaeia2016d2_en.pdf

      [6] Modigliani, F., & Miller, M. H. (1958) The cost of capital, corporation finance and the theory of investment. The American Economic Review 48(3), June 1958: 261-297. 261 -296.

      [7] Mostafa, H. T., & Boregowda, S. (2014). A Brief Review of Capital Structure Theories. Research Journal of Recent Sciences, 3(10), 113 –118.URL: http://www.isca.in/rjrs/archive/v3/i10/19.ISCA-RJRS-2013-772.pdf

      [8] Myers, S. C. & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information those investors do not have. Journal of Financial Economics, 13, 187-221. https://doi.org/10.1016/0304-405X(84)90023-0

      [9] Myers, S. C. (1984). The capital structure puzzle. The journal of finance, 39(3), 574-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x

      [10] Resolving Insolvency // Doing Business. World Bank. – URL: http://www.doingbusiness.org/data/exploretopics/resolving-insolvency

      [11] The cost of loans according to the statistical reporting of Ukrainian banks (excluding overdraft).- https://bank.gov.ua/control/uk/publish/control/uk/publish/article?art_id=27843415&cat_id=44578#2

      [12] Zymovets V. Derzhavna Finansova Polytyka Ecoomichnogo Rozvytku..- The Institute for Economics and Forecasting – 2010. (in Ucrainian)

  • Downloads

  • How to Cite

    Zymovets, V., Yershova, G., Kornyliuk, A., & Shynkarenko, R. (2018). The Distorted Corporate Capital Structure: Ukrainian Case. International Journal of Engineering & Technology, 7(4.8), 682-686. https://doi.org/10.14419/ijet.v7i4.8.27335

    Received date: 2019-02-12

    Accepted date: 2019-02-12

    Published date: 2018-10-13