Relationship Between Company Returns And Leverage According to the Business Sector: Empirical Evidence from the Czech Republic
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Date
2017
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Tomas Bata University in Zlin
Abstract
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.
Description
Subject(s)
business sector, company, debt, leverage, return
Citation
ISSN
1804-171X