The Phenomenon of Debt Absence in the Capital Structure of Companies in the Emerging Capital Markets.

taboroshko@gmail.com 8(903)269-93-07The investigation is connected with one of the major puzzles in corporate finance: the existence of zero-leverage companies, which share is significant, gradually increases and could not be explained by main existing capital structure theories (the trade-off theory and the pecking order theory). For instance, in the USA this share reaches more than 20%, in Russia it equals approximately 28%. Main studies devoted to this problem were published in 2012 and 2013, however they investigated only the developed markets of capital. Thus, the aim of this research is to define significant factors that could explain the existence of zero-leverage firms in the emerging capital markets based on the sample of Russian and Brazilian companies during the period 2004-2012. After analysis of previous investigations several hypotheses about the influence of financial constraints, managerial entrenchment, investment decisions and macroeconomic factors were tested. Following conclusions were derived. Firstly, the share of insider ownership is significant factor. Moreover, the decision of the company to eschew debt also depends on the future investments and macroeconomic factors. Finally, the idea that the share of unlevered firms increases through crisis period was verified.