Impact of Capital Structure on the Company’s Financial Situation during the Pandemic – Analysis Based on Examples of Listed Companies

Magdalena Jasiniak; Mateusz Rudzki

doi:10.18778/2391-6478.3.39.02

Authors

Magdalena Jasiniak Faculty of Economics and Sociology, University of Lodz https://orcid.org/0000-0002-1658-320X
Mateusz Rudzki Faculty of Economics and Sociology, University of Lodz

DOI:

https://doi.org/10.18778/2391-6478.3.39.02

Keywords:

financing strategies, capital structure, financial analysis, discriminant models, COVID-19 pandemic, liquidity, profitability

Abstract

Under the conditions of increased uncertainty making right financial decisions can determine success or failure of every company. Maintaining financial liquidity is especially important during impactful economic fluctuations when the risk of bankruptcy rises significantly.

The purpose of the article is to evaluate the impact of financing strategies on economic situation of companies during the pandemic as well as to verify whether safe strategy can be a reliable measure of protection from the danger of bankruptcy.

Methodology. Empirical research has been based on the analysis of 30 commercial sector companies’ financial statements from 2018 to 2020. The research has been completed with discriminant analysis models, and in order to receive clear interpretation of results a new indicator has been created. The indicator shows effectiveness of financing strategies as protection from negative results of the pandemic.

Results of the research prove that under the conditions of strong and rapid economic changes a conservative strategy is a relatively safer strategy than moderate and aggressive ones, yet, it does not guarantee full protection from bankruptcy. Additionally, moderately higher risk of financing allows to increase liquidity and profitability even during the pandemic which was also indicated in the research.

Downloads

Download data is not yet available.

References

Abeywardhana, D.K.Y. (2017). Capital Structure Theory: An Overview. Accounting and Finance Research, 6(1).
Google Scholar DOI: https://doi.org/10.5430/afr.v6n1p133

Azam, M., Haider, S.I. (2011). Impact of working capital management on firms’ performance: evidence from non-financial institutions of KSE-30 index. Interdisciplinary Journal of Contemporary Research in Business, 3(5).
Google Scholar

Banos-Caballero, S., García-Teruel, P.J., Martínez-Solano, P. (2012). How does working capital management affect SMEs profitability. Small Business Economics, 39(2).
Google Scholar

Baran, A. (2017). Wpływ struktury kapitału na rentowność przedsiębiorstw sektora produkcyjnego, handlowego i usługowego. Zeszyty Naukowe Uniwersytetu Ekonomicznego w Katowicach, 341.
Google Scholar

Bolek, M., Wolski, R. (2012). Profitability or Liquidity: Influencing he Market Value, The Case of Poland. International Journal of Economics and Finance, 4(9).
Google Scholar DOI: https://doi.org/10.5539/ijef.v4n9p182

Elijelly, A.M.A. (2004). Liquidity–profitability trade off: An empirical investigation in an emerging market. International Journal of Commerce and Management, 14(2).
Google Scholar DOI: https://doi.org/10.1108/10569210480000179

Fahim, S.R.S., Kaviani, M., Fashtali, M.P. (2015). Providing a new model for assessment of working capital management: Evidence from Tehran Stock Exchange. International Journal of Accounting and Financial Reporting, 5(1).
Google Scholar DOI: https://doi.org/10.5296/ijafr.v5i1.7284

García-Teruel, P.J., Martínez-Solano, P. (2012). How does working capital management affect SMEs profitability. Small Business Economics, 39(2).
Google Scholar DOI: https://doi.org/10.1007/s11187-011-9317-8

Gawryś, I. (2012). Identyfikacja strategii finansowania przedsiębiorstwa. Przedsiębiorczość i Zarządzanie, SAN.
Google Scholar

Harris, M., Raviv, A. (1991). The Theory of Capital Structure. The Journal of Finance, 46(1).
Google Scholar DOI: https://doi.org/10.1111/j.1540-6261.1991.tb03753.x

Huang, H., Ye, Y. (2021). Rethinking capital structure decision and corporate social responisbility in response to COVID-19. Accounting & Finance, 61.
Google Scholar DOI: https://doi.org/10.1111/acfi.12740

Kołosowska, B., Chojnacka, E., Tokarski, A., Tokarski, M. (2019). Strategie Finansowania działalności przedsiębiorstw. Warszawa: Wydawnictwo Nieoczywiste.
Google Scholar

Kowerski, M. (2016). Zależność między rentownością a płynnością finansową ma kształt odwróconego U. Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, 440.
Google Scholar

Michalak, A. (2013). Strategie finansowania przedsiębiorstw w branżach kapitałochłonnych na przykładzie polskich i światowych przedsiębiorstw górniczych. Zarządzanie i Finanse, 1, cz. 4.
Google Scholar

Mohd Azhari, N.K., Mahmud, R., Shaharuddin, S.N.H. (2022). Capital Structure of Malaysian Companies: Are They Different During Covid-19 Pandemic? Journal of Asian Finance, Economics and Business, 9(4).
Google Scholar

Mosionek Schweda, M. (2014). The Use of Discriminant Analysis to Predict the Bankruptcy of Companies Listed on the NewConnect Market. Equilibrium Quarterly Journal of Economics and Economic Policy, 9/3.
Google Scholar DOI: https://doi.org/10.12775/EQUIL.2014.019

Mostafa, H.T., Boregowda, S. (2014). A Brief Review of Capital Structure Theories. Research Journal of Recent Sciences, 3(10).
Google Scholar

Nurmasari, I., Manurung, A.H., Ulupui, G.K.A., Ahmad, G.N. (2022). Impact of Capital Structure on Firms Performance During the Covid-19 Pandemic. International Journal of Business, Economic and Law, 26(1).
Google Scholar

Olszewska, K., Turek, T. (2018). Analiza dyskryminacyjna jako narzędzie informacyjne w zakresie kondycji finansowej przedsiębiorstwa. Zeszyty Naukowe Politechniki Częstochowskiej Zarządzanie, 31.
Google Scholar DOI: https://doi.org/10.17512/znpcz.2018.3.15

Panigrahi, A.K., Joshi, V. (2019). Liquidity and Profitability Relationship and Financial Fallancy. Think India Journal, 22(10).
Google Scholar

Podilchuk, Z. (2013). Impact of liquidity management on profitability: evidence from Ukraine. Unpublished MA in Financial Economics thesis, Kyiv School of Economics. http://www.kse.org.ua [Accessed 20.08.2018].
Google Scholar

Sen, M., Oruc, E. (2009). Relationship between Efficiency Level of Working Capital Management and Return on Total Assets in ISE. International Journal of Business and Management, 4(10).
Google Scholar DOI: https://doi.org/10.5539/ijbm.v4n10p109

Thapa, D.P.P. (2013). How does profitability get affected by working capital management in food and beverages industry. Munich Personal RePec Archive, London School of Commerce, https://mpra.ub.uni-muenchen.de/ [Accessed 18.11.2017].
Google Scholar

Velnampy, T.D., Aloy Niresh, J. (2012). The relationship between capital structure and profitability. Global Journal of Management and Business Research, 12(13).
Google Scholar

Vintila, G., Nenu, E.A. (2016). Liquidity and Profitability Analysis on the Romanian Listed Companies. Journal of Eastern Europe Research in Business & Economics, 2016(2016).
Google Scholar DOI: https://doi.org/10.5171/2016.161707

Waleed, A., Pasha, A., Akhtar, A. (2016). Exploring the impact of liquidity on profitability: Evidence from banking sector of Pakistan. Journal of Internet Banking and Commerce, 21(3).
Google Scholar DOI: https://doi.org/10.2139/ssrn.2899817

Waściński, T., Kruk, M. (2010). Analiza powiązań pomiędzy rentownością i płynnością spółek branży cukierniczej notowanych na GPW w Warszawie. Zeszyty Naukowe Akademii Podlaskiej. Administracja i Zarządzanie, 11(84).
Google Scholar