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Regular version of the site

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Aleksandra Lebedeva
The Influence of the Economic Crisis on the Capital Structure of Russian Companies
Financial Economics
(Master’s programme)
2018
The main aim of this research was to understand how economic distress in general affects the way the capital structure of Russian companies is chosen. Besides, we tried to find out which of the existing theories is able to explain it and whether the leverage level can be described with the same theory during and after the crisis. Therefore we studied data for Russian companies since 2004 until 2017, thus way including in consideration two economic crises: the global financial crisis of 2008 and recent crisis in Russia of 2014.

It was concluded that during the crises the capital structure of companies had changed. In case of global financial crisis, the share of long-term borrowings decreased, while the share of short-term ones got higher, what led to insignificant change of total debt share. During the crises of 2014 both short-term and long-term debt shares increased, but partially because of loans revaluation due to sharp increase of the currency exchange rate during the distress. Without the revaluation effect, the influence of the crises of 2014 was similar to the one of 2008: companies partially replaced the long-term debt with the short-term one.

Besides, both crises also changed the way how firms take decisions about their optimal capital structure. For instance, more profitable firms, on average, used significantly lower amount of short- and long-term loans in their capital structure during both crises compared to the other companies. In relatively tranquil time this difference was not so pronounced. Besides, larger companies had higher share of long-term borrowings in the tranquil time, however, during the crises years this difference disappeared. In general, the signs of the capital structure determinants indicate that Russian companies’ behaviour can be explained by pecking order theory. However, the analysis of different periods showed that in condition of stress firms can act differently, what hinders the theory identification.

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