Building an optimal capital structure of start‑ups

Abstract

Effective financial management and optimal capital structure are important for companies to obtain better operational performance. The purpose of this study is the review of the most important theories in terms of optimal financial structure and to explore the most important factors affecting decisions in that area. A bad decision about the capital structure may lead to financial lack of balance and even to bankruptcy. There are many alternative theories on how to build optimal capital structures, which, as indicated by practice, may occur to be insufficient. There is no significant studies that clearly indicate the determinants of a particular solution in the financial structure of companies, especially those referred to as startup companies, mainly because of specifics of that group of companies. It is not possible to indicate which of the leading approaches to the capital structure more fully describes the decisions of start‑ups as to the financing structure. Nevertheless, the results indicate that managers of companies often include similar decisions competitors and modulate the policy of his company within the capital structure for a particular, market standard, which is confirmed by Abdulsaleh and Worthington.