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INVESTIGATION INTO THE DEBT FINANCING OF BUSINESSES IN THE CZECH REPUBLIC
Abstract
This study focuses on the specific features of business financing in the Czech Republic, thereby contributing to an ongoing discussion on the corporate capital structure and its optimal form. The paper aims to provide up-to-date empirical evidence on the debt and equity financing of selected companies from the Czech Republic within 4 business sectors. Findings of this article are based on the questionnaire survey and subsequent data analysis. The statistical methods and procedures were used for the research evaluation. Results of the empirical questioning show that majority of respondents use any form of debt financing (to a various extent). The prevailing debt sources of financing are bank loans, leasing, trade credit, and down payments of customers. Only a small percentage of respondents indicate that they use bonds as a source of corporate financing. To the most frequent reasons for the use of debt resources in companies belong the lack equity sources, tax deductibility of interest cost, or the lower cost of debt. All respondents confirmed the use of equity (to a various extent) in business financing. The primary equity sources of financing are retained earnings, accumulated depreciation, subsidies, reserve funds, and common stock. Furthermore, the findings indicate that to the main reasons for the use of equity sources belong efforts to the reduction of indebtedness, availability of sufficient equity sources, and a lower risk. Even though most companies confirm the use of debt to some extent, it can be stated, that 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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