Motives for the Choice of Capital Structure by Russian Companies at the Growth Stage in the Life-Cycle

<p>Problems of motives for the choice of capital structure by companies all over the world attract a huge attention from scientists in recent decades. Despite extensive researched in this field, the role of companies&#39; life cycle in capital structure formation is still poorly studied. In addition, most researches focuses on companies from developed countries but not on companies from developing. There is a big problem of low level of studying of these problems in developing countries, including Russia.</p><p>The relevance of research caused by necessity of studying a wide range of capital structure determinants for Russian companies and testing traditional theories of capital structure on them.</p><p>The purpose of this research is to identify the motives for choice of capital structure by Russian companies at the growth stage in life-cycle.</p><p>The aim was achieved by successive solution of several tasks:</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; A detailed review of existing capital structure theories and life-cycle models was conducted;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The method of separation companies by stages of life-cycle was selected and applied to the studied sample;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The determinants of capital structure for all Russian companies and companies at the growth stage were identified;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The target capital structure of these companies was identified;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Trade-off theory of capital structure was tested for the entire sample and for companies at the growth stage;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pecking order theory of capital structure was tested for the entire sample and for companies at the growth stage;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The analysis of results was conducted, conclusions were described;</p><p style="margin-left:78.55pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Directions for further researches in this area were given.</p><p>Object of research are Russian companies listed on the Moscow Stock Exchange. Data for empirical study were discharged from Bloomberg database. Missing data were collected from companies statements published on their official websites.</p><p>Obtained data were used to analyze the behavior of Russian companies in different time periods (before the crisis, during the crisis and after the crisis) by the construction of panel data regressions (pooled regression, regression with determined individual effects, regression with random individual effects).</p><p>The most interesting outcomes from the scientific and practical point of view are:</p><p style="margin-left:71.45pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Two new determinants that had never been tested before on data from Russian companies were included to research &ndash; liquidity and business risk. It was revealed that company&#39;s liquidity is an important factor for choice of capital structure by companies at growth stage. Business risk is only significant for companies at the growth stage in the period before crisis.</p><p style="margin-left:71.45pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; It was revealed that tangibility of assets if significant factor for Russian companies at the growth stage, while size and profitability are significant in all time periods.</p><p style="margin-left:71.45pt;">&middot;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; It is shown that the traditional theories of capital structure (trade-off and pecking order) are peculiar for all Russian companies, but they can not the only one explanation of capital structure choice.</p><p>The research is consists of 74 pages, 88 references and 2 appendixes.</p>