The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic

The paper aims to provide up-to-date empirical evidence of relationship between the key indicators of business competitiveness: leverage and corporate performance. The study is based on corporate financial data of selected companies from the Czech Republic within 14 major business sectors according...

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Main Author: Stryckova Lenka
Format: Article
Language:English
Published: Tomas Bata University in Zlín 2017-09-01
Series:Journal of Competitiveness
Subjects:
Online Access:https://www.cjournal.cz/files/260.pdf
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author Stryckova Lenka
author_facet Stryckova Lenka
author_sort Stryckova Lenka
collection DOAJ
description The paper aims to provide up-to-date empirical evidence of relationship between the key indicators of business competitiveness: leverage and corporate performance. The study is based on corporate financial data of selected companies from the Czech Republic within 14 major business sectors according to CZ-NACE which companies published for the year 2014. The results of this study show that leverage (debt ratio) has a substantially negative effect on corporate performance when the return on equity (ROE) is used as an indicator of corporate performance in the Czech Republic over the period covered by the study. The results of the regression analysis confirmed negative relationship between the company profitability and the use of debt in majority of business sectors (Agriculture, fishery, and forestry; Construction, Wholesale and retail trade, repair of motor vehicles and motorcycles; Professional, scientific and technical activities; Administrative and support service activities). The opposite relationship was found in one business sector only (Mining and quarrying) where positive relationship between the company profitability and leverage was confirmed. Among other things, the results of this study confirm that corporate leverage varies across industries.
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spelling doaj.art-17c2ea6a6e4d4af48f16e02a27985be52022-12-21T22:00:41ZengTomas Bata University in ZlínJournal of Competitiveness1804-171X1804-17282017-09-01939811010.7441/joc.2017.03.07The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech RepublicStryckova Lenka0Technical University of Liberec, Faculty of EconomicsThe paper aims to provide up-to-date empirical evidence of relationship between the key indicators of business competitiveness: leverage and corporate performance. The study is based on corporate financial data of selected companies from the Czech Republic within 14 major business sectors according to CZ-NACE which companies published for the year 2014. The results of this study show that leverage (debt ratio) has a substantially negative effect on corporate performance when the return on equity (ROE) is used as an indicator of corporate performance in the Czech Republic over the period covered by the study. The results of the regression analysis confirmed negative relationship between the company profitability and the use of debt in majority of business sectors (Agriculture, fishery, and forestry; Construction, Wholesale and retail trade, repair of motor vehicles and motorcycles; Professional, scientific and technical activities; Administrative and support service activities). The opposite relationship was found in one business sector only (Mining and quarrying) where positive relationship between the company profitability and leverage was confirmed. Among other things, the results of this study confirm that corporate leverage varies across industries.https://www.cjournal.cz/files/260.pdfbusiness sectorcompanydebtleveragereturn
spellingShingle Stryckova Lenka
The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
Journal of Competitiveness
business sector
company
debt
leverage
return
title The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
title_full The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
title_fullStr The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
title_full_unstemmed The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
title_short The Relationship Between Company Returns and Leverage Depending on the Business Sector: Empirical Evidence from the Czech Republic
title_sort relationship between company returns and leverage depending on the business sector empirical evidence from the czech republic
topic business sector
company
debt
leverage
return
url https://www.cjournal.cz/files/260.pdf
work_keys_str_mv AT stryckovalenka therelationshipbetweencompanyreturnsandleveragedependingonthebusinesssectorempiricalevidencefromtheczechrepublic
AT stryckovalenka relationshipbetweencompanyreturnsandleveragedependingonthebusinesssectorempiricalevidencefromtheczechrepublic