Distinctive determinants of financial indebtedness: evidence from Slovak and Czech enterprises
DOI:
https://doi.org/10.24136/eq.2021.023Keywords:
indebtedness, financial performance, determinants, construction sectorAbstract
Research background: Indebtedness indicators are used to monitor the structure of corporate financial resources. The company's share of its own and foreign resources affects the financial stability of the company. A high share of own re-sources makes the company stable, and independent. With a low share, on the contrary, the company is unstable, market fluctuations and credit uncertainty can have serious consequences. However, foreign capital is cheaper, and too high indebtedness ratios can jeopardize the existence of enterprises.
Purpose of the article: In general, the economic recession worsens the capital structure of enterprises, especially their debt management. Thus, the paper aims to apply the set of 13 indebtedness ratios to a sample of 779 Slovak and Czech enterprises from the construction sector to determine key microeconomic determinants that may influence the level of indebtedness.
Methods: A non-parametric one-way analysis of variance ? the Kruskal-Wallis test ? was used to determine whether the set of indebtedness ratios is the same across countries, districts, and sizes. For analyzing the specific sample pair of stochastic dominance, the pairwise comparison was realized using the Dunn'stest with Bonferonni correction. The Mann-Whitney test was used to compare the differences in the set of indebtedness ratios between two independent groups of enterprises, based on their legal form and country.
Findings & value added: The level of total indebtedness ratio and the self-financing ratio depends on the region as well as on the size of the enterprise and the legal form. In the case of credit indebtedness and debt-to-cash-flow indebted-ness, their dependence on the size of the enterprise and the legal form is obvious. The importance of the region and the legal form of enterprises, vice versa, affect the level of the financial independence ratio. These outputs are relevant for au-thorities, policy makers, or financial institutions to identify financial constraints that construction enterprises face and, as a result, make a long-term contribution to theory in this field.
Downloads
References
Adhikari, K., & Poudyal, L. (2021). Future of construction industry: COVID-19 and its implications on construction projects and risk management ? a review. Preprints. doi: 10.20944/preprints202104.0383.v1.
DOI: https://doi.org/10.20944/preprints202104.0383.v1
View in Google Scholar
Alimov, D. A., Obrosova, N. K., & Shananin, A. A. (2019). Enterprise debt analysis using a mathematical model of production, considering the deficit of current assets. Lobachevskii Journal of Mathematics, 40(4), 385?399. doi: 0.1134/S1 995080219040024.
DOI: https://doi.org/10.1134/S1995080219040024
View in Google Scholar
Bartosova, V., Paliderova, M., Jaros, J., & Kovalova, E. (2020). Financial reporting and analysis. Žilina: EDIS.
View in Google Scholar
Belas, J., Gavurova, B., Cepel, M., & Kubak, M. (2020). Evaluation of economic potential of business environment development by comparing sector differences: perspective of SMEs in the Czech Republic and Slovakia. Oeconomia Copernicana, 11(1), 135?159. doi: 10.24136/oc.2020.006
DOI: https://doi.org/10.24136/oc.2020.006
View in Google Scholar
Buzinskiene, R. (2019). Framework for assessing the structure of corporate intangible assets. Ekonomicko-manazerske spektrum, 13(2), 10?27. doi: 10.26552/e ms.2019.2.10-27.
DOI: https://doi.org/10.26552/ems.2019.2.10-27
View in Google Scholar
Casni, A. C., & Filic, J. (2019). Modelling the influence of cash flow on indebtedness of Croatian companies using linear regression model. Ekonomska Misao I Praksa ? Economic Thought and Practice, 28(2), 39?52.
View in Google Scholar
Chikan, A. (2008). National and firm competitiveness: a general research model. Competitiveness Review, 18(1/2), 20?28. doi: 10.1108/10595420810874583.
DOI: https://doi.org/10.1108/10595420810874583
View in Google Scholar
Csanadi, M. (2014). State intervention, local indebtedness, investemtn overheating and their systemtic background during the global crisis in China. Ter er Tarsadalom, 28(1), 113?129.
View in Google Scholar
Csanadi, M. (2015). Systematic background of local indebtedness and investment overheating during the global crisis in China. Journal of Chinese Economic and Business Studies, 13(2), 147?174. doi: 10.1080/14765284.2015.1021114.
DOI: https://doi.org/10.1080/14765284.2015.1021114
View in Google Scholar
Culkova, K., Tausova, M., Muchova, M. S, Domaracka, L., & Taus, P. (2018). Indebtedness in chosen industrial sectors with regard to the economic development in the world. Ekonomicky Casopis, 66(1), 28?42.
View in Google Scholar
Dallabona, L. F., Goncalves, M., & Radloff, E. G. (2019). Determining factors and indebtedness of the companies listed on the BM & FBOVESPA between the Lula's presidential term (2007-2010) and Dilma's presidential term (2011-2014). Revista Evidenciacao Contabil & Financas, 63(3), 54?74. doi: 10.224 78/ufpb.2318-1001.2018v6n3.3737.
DOI: https://doi.org/10.22478/ufpb.2318-1001.2018v6n3.37372
View in Google Scholar
Durana, P., Zauskova, A., Vagner, L., & Zadnanova, S. (2020). Earnings drivers of Slovak manufacturers: efficiency assessment of innovation management. Applied Sciences, 10(12), 4251. doi: 10.3390/app10124251.
DOI: https://doi.org/10.3390/app10124251
View in Google Scholar
Durmanov, A., Bartosova, V., Drobyazko, S., Melnyk, O., & Fillipov, V. (2019). Mechanism to ensure sustainable development of enterprises in the information space. Entrepreneurship and Sustainability Issues, 7(2), 1377?1386. doi: 10.97 70/jesi.2019.7.2(40).
DOI: https://doi.org/10.9770/jesi.2019.7.2(40)
View in Google Scholar
Fernandez de Guevara, J., Maudos, J., & Salvador, C. (2021). Effects of the degree of financial constraint and excessive indebtedness on firms' investment decisions. Journal of International Money and Finance, 110, 102288. doi: 10.1016/ j.jimonfin.2020.102288.
DOI: https://doi.org/10.1016/j.jimonfin.2020.102288
View in Google Scholar
Field, A. (2013). Discovering statistics using SPSS: and sex and drugs and rock 'n' roll. London: SAGE.
View in Google Scholar
Giday, A. (2013). Indebtedness in Central and Eastern Europe Eight years of new EU members. Public Finance Quarterly ? Hungary, 58(3), 271?292.
View in Google Scholar
Hernandez Nicolas, C. M., Martin Ugedo, J. F., & Minguez, V. A. (2016). The influence of gender in the direction of Spanish cooperative societies on profitability and indebtedness: an empirical analysis. Revesco ? Revista de Estudios Cooperativos, 122, 135?164. doi: 10.5209/rev_REVE.2016.v122.52021.
DOI: https://doi.org/10.5209/rev_REVE.2016.v122.52021
View in Google Scholar
Kaur, V., & Singh, G. (2014). Determinants of indebtedness among farmers in rural Haryana. Indian Journal of Economics and Development, 10(2), 123?131. doi: 10.5958/j.2322-0430.10.2.040.
DOI: https://doi.org/10.5958/j.2322-0430.10.2.040
View in Google Scholar
Khoja, L., Chipulu, M., & Jayasekera, R. (2019). Analysis of financial distress cross countries: using macroeconomic, industrial indicators and accounting data. International Review of Financial Analysis, 66, 1?37. doi: 10.1016/j.irfa.201 9.101379.
DOI: https://doi.org/10.1016/j.irfa.2019.101379
View in Google Scholar
Klazar, S., & Slintakova, B. (2019). Influence of income taxation on indebtedness on non-financial firms. Politicka Ekonomie, 67(3), 253?272. doi: 10.18267/j.p olek.1239.
DOI: https://doi.org/10.18267/j.polek.1239
View in Google Scholar
Kliestik, T., Valaskova, K., Lazaroiu, G., Kovacova, M., & Vrbka, J. (2020). Remaining financially healthy and competitive: the role of financial predictors. Journal of Competitiveness, 12(1), 74?92. doi: 10.7441/joc.2020.01.05.
DOI: https://doi.org/10.7441/joc.2020.01.05
View in Google Scholar
Korzeb, Z., & Niedziółka, P. (2020). Resistance of commercial banks to the crisis caused by the COVID-19 pandemic: the case of Poland. Equilibrium. Quarterly Journal of Economics and Economic Policy, 15(2). 205?234. doi: 10.24136/eq .2020.010.
DOI: https://doi.org/10.24136/eq.2020.010
View in Google Scholar
Kravcakova Vozarova, I., Kotulic, R., & Vavrek, R. (2019). Disparities in the financial performance of agricultural entities according to the legal form: the case of Slovakia. Applied Economics, 51(5). 5999?6008. doi: 10.1080/000368 46.2019.1645285.
DOI: https://doi.org/10.1080/00036846.2019.1645285
View in Google Scholar
Lopez-Delgado, P., & Dieguez-Soto, J. (2020). Indebtedness in family-managed firms: the moderating role of female directors on the board. Review of Managerial Science, 14(4), 727?762. doi: 10.1007/s11846-018-0307-y.
DOI: https://doi.org/10.1007/s11846-018-0307-y
View in Google Scholar
Majdakova, A., Giertliova, B., & Hajduchova, I. (2020). Prediction by financial and economic analysis in the conditions of forest enterprises. Journal of Forest Science, 66, 1?8. doi: 10.17221/84/2019-JFS.
DOI: https://doi.org/10.17221/84/2019-JFS
View in Google Scholar
Majumdar, R. (2014). The determinants of indebtedness of unlisted manufacturing firms in India: a panel data analysis. Management Research Review, 37(9), 833?854. doi: 10.1108/MRR-09-2012-0193.
DOI: https://doi.org/10.1108/MRR-09-2012-0193
View in Google Scholar
Marquezan, L. H. F, Diehl, C. A, & Alberton, J. R. (2013). Non-financial indicators for performance evaluation: a content analysis study of on-line annual reports of companies listed on BOVESPA. Contabilidade Gestao E Governanca, 16, 46-61.
View in Google Scholar
Mazzoleni, A., & Pollonini, E. (2021). Factors driving indebtedness among small- and medium-sized dairy companies. British Food Journal, 123(1), 159?175. doi: 10.1108/BFJ-04-2020-0341.
DOI: https://doi.org/10.1108/BFJ-04-2020-0341
View in Google Scholar
Melly, C. (2012). Local government indebtedness and debt management in Switzerland causes and consequences. Public Finance Quarterly ? Hungary, 57(2), 164?172.
View in Google Scholar
Mukhibad, H., Subowo, S., Maharin, D.O., & Mukhtar, S. (2020). Determinants of debt policy for public companies in Indonesia. Journal of Asian Finance Economics and Business, 7(6), 29?37. doi: 10.13106/jafeb.2020.vol7.no6.029.
DOI: https://doi.org/10.13106/jafeb.2020.vol7.no6.029
View in Google Scholar
Neumaier, I., & Neumair, I. (2002). Corporate performance and market value. Prague: Grada Publishing.
View in Google Scholar
Mijic, K., & Jaksic, D. (2017). Indebtedness of enterprises and profitability improvement. Strategic Management, 22(2), 36?40.
View in Google Scholar
Ng, S. T., Wong, J. M. W., & Zhang, J. (2011). Applying Z-score model to distinguish insolvent construction companies in China. Habitat International, 35, 599?607. doi: 10.1016/j.habitatint.2011.03.008.
DOI: https://doi.org/10.1016/j.habitatint.2011.03.008
View in Google Scholar
Öcal, M. E., Oral, E. L., Erdis, E., & Vural, G. (2007). Industry financial ratios ? application of factor analysis in Turkish construction industry. Building and Environment, 42, 385?392. doi: 10.1016/j.buildenv.2005.07.023.
DOI: https://doi.org/10.1016/j.buildenv.2005.07.023
View in Google Scholar
OECD (2021). Long term interest rates. Retrieved from https://data.oecd.org/intere st/long-term-interest-rates.htm#indicator-chart (24.5.2021).
View in Google Scholar
Onuferova, E., Cabinova, V., & Dzurov Vargovagw, T. (2020). Analysis of modern methods for increasing and managing the financial prosperity of businesses in the context of performance: a case study of the tourism sector in Slovakia. Oeconomia Copernicana, 11(1), 95?116. doi: 10.24136/oc.2020.004.
DOI: https://doi.org/10.24136/oc.2020.004
View in Google Scholar
Osagie, R. O. (2020). Financial inclusion: A PANACEA for attaining sustainable development in developing countries like Nigeria. Ekonomicko-manazerske spektrum, 14(2), 1?11. doi: 10.26552/ems.2020.2.1-11.
DOI: https://doi.org/10.26552/ems.2020.2.1-11
View in Google Scholar
Pardal, P., Dias, R., Suler, P., Teixeira, N., & Krulický, T. (2020). Integration in Central European capital markets in the context of the global COVID-19 pandemic. Equilibrium. Quarterly Journal of Economics and Economic Policy, 15(4), 627?650. doi: 10.24136/eq.2020.027.
DOI: https://doi.org/10.24136/eq.2020.027
View in Google Scholar
Pelaez-Verdet A, & Loscertales-Sanchez P. (2021). Key ratios for long-term prediction of hotel financial distress and corporate default: survival analysis for an economic stagnation. Sustainability, 13(3), 1473. doi: 10.3390/su13031 473.
DOI: https://doi.org/10.3390/su13031473
View in Google Scholar
Perez Ragone, A. J., & Martinez Benavides, P. (2015). From the over-indebtedness to the insolvency: stages of debtors crisis, from the comparative European law. Revista Chilena de Derecho, 42(1), 93?121.
DOI: https://doi.org/10.4067/S0718-34372015000100005
View in Google Scholar
Pur, D., Jacova, H., & Horak, J. (2015). An evaluation of selected assets and their impact on the declarative characteristic of ratio indicators in financial analyses. E & M Ekonomie a management, 18, 132?149. doi: 10.15240/tul/00 1/2015-4-010.
DOI: https://doi.org/10.15240/tul/001/2015-4-010
View in Google Scholar
Rusu, V. D., & Roman, A. (2017). Microeconomic determinants of frim indebtedness. Empirical evidence from Romania. In M. Tofan, A. Roman & I. Bilan (Eds). Eufire 2017: the proceedings of the international conference on European financial regulation. Iasi: Alexandru Ioan Cuza University, 276?285.
View in Google Scholar
Schicks, J. (2014). Over-indebtedness in microfinance: an empirical analysis of related factors on the borrower level. World Development, 54, 301?324. doi: 10.1016/j.worlddev.2013.08.009.
DOI: https://doi.org/10.1016/j.worlddev.2013.08.009
View in Google Scholar
Siekelova, A., Androniceanu, A., Durana, P., & Michalikova, K.F. (2020). Earnings management (EM), initiatives and company size: an empirical study. Acta Polytechnica Hungarica, 17(9), 41?56. doi: 10.12700/APH.17.9.2020.9.3.
DOI: https://doi.org/10.12700/APH.17.9.2020.9.3
View in Google Scholar
Standar, A., & Kozera, A. (2020). Identifying the financial risk factors of excessive indebtedness of rural communes in Poland. Sustianability, 12(3), 794. doi: 10.3390/su12030794.
DOI: https://doi.org/10.3390/su12030794
View in Google Scholar
Stefko, R., Jencová, S., Vasaničová, P., & Litavcová, E. (2019). An evaluation of financial health in the electrical engineering industry. Journal of Competitiveness. 11, 144?160. doi: 10.7441/joc.2019.04.10.
DOI: https://doi.org/10.7441/joc.2019.04.10
View in Google Scholar
Svabova, L., Tesarova, E. N., Durica, M., & Strakova, L. (2021). Evaluation of the impacts of the COVID-19 pandemic on the development of the unemployment rate in Slovakia: counterfactual before-after comparison. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(2), 261?284. doi: 10.24136/ eq.2021.010.
DOI: https://doi.org/10.24136/eq.2021.010
View in Google Scholar
Zinecker, M., Doubravský, K., Balcerzak, A.P., Pietrzak, M. B., & Dohnal, M. (2021). The Covid-19 disease and policy response to mitigate the economic impact in the EU: an exploratory study based on qualitative trend analysis. Technological and Economic Development of Economy, 27(3), 742?762. doi: 10.3846/tede.2021.14585.
DOI: https://doi.org/10.3846/tede.2021.14585
View in Google Scholar
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Equilibrium. Quarterly Journal of Economics and Economic Policy
This work is licensed under a Creative Commons Attribution 4.0 International License.
