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CORPORATE INVESTMENT DECISIONS: EMPIRICAL EVIDENCE FROM THE CZECH REPUBLIC
Abstract
The aim of this article is to track the process of a corporate capital structure creation, and more specifically it is focused on the investment decisions as the preceding step thereof. The final corporate capital structure depends generally on a large variety of determinants, and the chosen investment decisions are formed by the firm's individual decisions. What are the real motives and causes behind the firm's investment decisions? The empirical research attempts to answer this question, which is concerned with internal factors determining the corporate capital structure in the financial literature. The research findings are based on the questionnaire survey performed amongst companies in the Czech Republic and the subsequent data analysis. The statistical methods and procedures were used for the research evaluation. Results of the empirical questioning show that most companies monitor the debt-to-equity ratio, they rely primarily on the internal sources of financing, and they expect that their capital structure remains constant even in the near future. The inquiry also revealed that the Czech companies like to use various methods for their investment decisions, from which the payback period, and the profitability index prevail. Generally, the major respondents of the research, the medium-sized companies, have conservative attitude towards debt financing. Their decisions are in accordance with the pecking-order theory, in which firms consider their own resources (equity and profit) as primary source of financing, and they start considering the debt financing only in case of their shortage.
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