The Impact of Financial Constraints on Company's Capital Structure Bias from the Target Level

The influence of financial constraints and institutional environment on the bias of financial leverage from target level is investigated in this study. The study provides a classification of factors of capital structure in accordance with their influence on the gap between target and actual capital structure. The estimation procedure is divided into 2 parts: estimation of target capital structure with OLS model and PLS-SEM approach for latent variables of financial constraints and institutional environment construction and estimating their effect. Panel data is used which include observations of Russian companies over period 2004-2013, was provided by International Laboratory of Intangible-driven Economy (IDLAB). It was stated that financial constraints lead to an increase of the gap between actual and target capital structure. Favourable institutional environment also lead to the increase of the bias of financial leverage from target level.