The impact of liquidity on the capital structure: a case study of Croatian firms
Background: Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more frequently financed by their own capital and therefore were less leveraged. Objectives: The aim of this paper is to investigate the impact of liquidity on...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Sciendo
2012-01-01
|
| Series: | Business Systems Research |
| Subjects: | |
| Online Access: | http://www.degruyter.com/view/j/bsrj.2012.3.issue-1/v10305-012-0005-1/v10305-012-0005-1.xml?format=INT |
| _version_ | 1811342225692426240 |
|---|---|
| author | Nataša Šarlija Martina Harc |
| author_facet | Nataša Šarlija Martina Harc |
| author_sort | Nataša Šarlija |
| collection | DOAJ |
| description | Background: Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more frequently financed by their own capital and therefore were less leveraged. Objectives: The aim of this paper is to investigate the impact of liquidity on the capital structure of Croatian firms. Methods/Approach: Pearson correlation coefficient is applied to the test on 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. Results: A survey has been conducted on a sample of 1058 Croatian firms. There are statistically significant correlations between liquidity ratios and leverage ratios. Also, there are statistically significant correlations between leverage ratios and the structure of current assets. The relationship between liquidity ratios and the short-term leverage is stronger than between liquidity ratios and the long-term leverage. Conclusions: The more liquid assets firms have, the less they are leveraged. Long- term leveraged firms are more liquid. Increasing inventory levels leads to an increase in leverage. Furthermore, increasing the cash in current assets leads to a reduction in the short-term and the long- term leverage. |
| first_indexed | 2024-04-13T19:07:49Z |
| format | Article |
| id | doaj.art-3da264d8ac004c9ba8866dc1c9c991ab |
| institution | Directory Open Access Journal |
| issn | 1847-8344 1847-9375 |
| language | English |
| last_indexed | 2024-04-13T19:07:49Z |
| publishDate | 2012-01-01 |
| publisher | Sciendo |
| record_format | Article |
| series | Business Systems Research |
| spelling | doaj.art-3da264d8ac004c9ba8866dc1c9c991ab2022-12-22T02:33:56ZengSciendoBusiness Systems Research1847-83441847-93752012-01-01313036The impact of liquidity on the capital structure: a case study of Croatian firmsNataša ŠarlijaMartina HarcBackground: Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more frequently financed by their own capital and therefore were less leveraged. Objectives: The aim of this paper is to investigate the impact of liquidity on the capital structure of Croatian firms. Methods/Approach: Pearson correlation coefficient is applied to the test on 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. Results: A survey has been conducted on a sample of 1058 Croatian firms. There are statistically significant correlations between liquidity ratios and leverage ratios. Also, there are statistically significant correlations between leverage ratios and the structure of current assets. The relationship between liquidity ratios and the short-term leverage is stronger than between liquidity ratios and the long-term leverage. Conclusions: The more liquid assets firms have, the less they are leveraged. Long- term leveraged firms are more liquid. Increasing inventory levels leads to an increase in leverage. Furthermore, increasing the cash in current assets leads to a reduction in the short-term and the long- term leverage.http://www.degruyter.com/view/j/bsrj.2012.3.issue-1/v10305-012-0005-1/v10305-012-0005-1.xml?format=INTliquiditycapital structureleverage |
| spellingShingle | Nataša Šarlija Martina Harc The impact of liquidity on the capital structure: a case study of Croatian firms Business Systems Research liquidity capital structure leverage |
| title | The impact of liquidity on the capital structure: a case study of Croatian firms |
| title_full | The impact of liquidity on the capital structure: a case study of Croatian firms |
| title_fullStr | The impact of liquidity on the capital structure: a case study of Croatian firms |
| title_full_unstemmed | The impact of liquidity on the capital structure: a case study of Croatian firms |
| title_short | The impact of liquidity on the capital structure: a case study of Croatian firms |
| title_sort | impact of liquidity on the capital structure a case study of croatian firms |
| topic | liquidity capital structure leverage |
| url | http://www.degruyter.com/view/j/bsrj.2012.3.issue-1/v10305-012-0005-1/v10305-012-0005-1.xml?format=INT |
| work_keys_str_mv | AT natasasarlija theimpactofliquidityonthecapitalstructureacasestudyofcroatianfirms AT martinaharc theimpactofliquidityonthecapitalstructureacasestudyofcroatianfirms AT natasasarlija impactofliquidityonthecapitalstructureacasestudyofcroatianfirms AT martinaharc impactofliquidityonthecapitalstructureacasestudyofcroatianfirms |