impact of liquidity

WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION

223

Impact of Liquidity on Capital Structure of Textile

Sector of Pakistan

Yaser Pervaiz (Corresponding Author), Asad Zaman, Sadia Abdul Salam, Muhammad Bilal

MBA/MS (Banking & Finance), GC University Faisalabad, Pakistan

Accepted 22 August 2013

Abstract This paper explores the impact of liquidity on capital structure. The firms which have more liquid equity enjoys a lower cost of equity and may be motivated to have more equity and less debt in their capital structure. Study shows that asset liquidity increases the debt capacity of the firms or organization when bond covenants restrict the disposition of the asset. The results demonstrate that liquidity has least impact on capital structure but not the significant impact on capital structure of the firm. Liquidity must be taken into account when the companies want to get the additional capital from the outsiders. The easiest way to increase the capital is to issue the long term bonds because companies have ample time to return the amount of bond along with interest. When the firms increase the inventory level, this will lead to increase in leverage. When the firms increase the cash in hand and other current assets, this will lead to reduction in the short term and long term debts. Key Words: Liquidity, Capital Structure, Textile 1. Introduction

The textile sector has great importance since it is involved in the production of yarn which is the most important to the whole procedure of making clothes. Textile products play an important role in meeting the basic needs. The clothing industry is where the majority of textile are produced and used. However, textile sector is important in our lives from birth to death.

Obviously, textile sector of Pakistan participate an active role for the economic development of Pakistan. Pakistan is at 8th position in Asian countries for the export of textile merchandise. The contribution in GDP of textile sector is 9.5% in 2012 and 15 million population availing employment opportunities from this particular sector which is 30% of the total employed people of Pakistan. Participation of Pakistan in international trade is less than 1 percent which is approximately 18 trillion dollars. After independence, in initial decades Pakistan produces quality products. In present, Pakistan produces all types of textile products at global level as well as at small and medium businesses. Pakistan is very prominent in the production of cotton and has 4th place and due to high usage of cotton Pakistan hold 3rd position all over the world. The textile division has been the backbone for the economy of Pakistan in the terms of foreign exchange and providing job opportunities for the last 5 decades. There is no

Journal of Economics & Finance (JEF) AUGUST 2013 VOL.1, No.6


224

alternate industry that can provide potential benefits to the economy with foreign earnings and job opportunities. The textile sector will be beneficial for the growth of the country in the future. Liquidity means the point at which a security and assets can be purchased or sold easily without recourse to the court of law. Most companies adopt debt financing strategy rather than equity financing and that’s why most of the banks prefer lending more willingly than investing. Liquidity is important if a person or a company needs access funds in short time frame or to pay for expense. Capital Formation means how much proportion of capital comes from equity financing and how much comes from debt financing. The stakeholders of the companies have much interest in the debt to equity ratio of the company which shows the credit standing of that company. Capital accumulation describes that how a corporation funding its assets. Capital comes in a company into two forms which are as follows, Equity Capital. This portion shows money owing by the shareholders. Debt Capital. This refers to the borrowed money that use by the business. The long term bonds are usually the secure form of debt. 1.2 Problem Statement

As the textile industry is growing, liquidity has major impact on capital structure decision making. When financial institutions want to provide finance in a particular company, they analyze the liquidity of that company in which they are investing. 1.3 Research Question What is the impact of liquidity on capital accumulation of textile sector? 1.4 Research Objective The main objectives of conducting the research are, 1. To evaluate that how much liquidity affect the capital structure of textile sector. 2. To evaluate that how much liquidity is important for any organization. 3. How much current ratio has significant impact on organization. 1.5 Limitation of the study

In this study only one sector has been taken. The span of time is limited only five years from 2007 to 2012. The total number of companies taken as sample is 10. The results were affected due to the lack of reliability of data. The results were also bounded because the duration is also limited. That was the dilemma in this study. The rest of the paper explains next sections in the following manner. Next Section explains literature review of other studies related to this topic from all over the world. Section 2 chase the next section explain the data and research methodology while section 4 reveal the results & discussions and after it in sections 5 describe the conclusion and recommendations. Lastly, reference list is given. 2. Literature Review

Morellec (2001) examined that the asset liquidity has major impact on firm’s securities and its decision for financing. He investigated in his research by using the model of asset price that production capacity of a firm did not affect due to change in the demand of the goods. He demonstrated that credit spreads enhance with the change in unsecured debt and it will reduce favorable leverage. He concluded in his another model that the asset liquidity has a hefty impact on capital accumulation preference of the corporation.

Marmor and Valentincic (2003) investigated that creditors of small enterprises interested in short term liquidity because any cash deficiency can result in delayed payment. He concluded with the help of nave model that once a firm experience liquidity difficulty or problem of delayed payment in any period by reason of inadequate bank balance then the corporation will consistently have the same problem in the preceding year unless the company restructures. He also examined by using the financial ratios that ratios convey additional


225

information about potential liquidity of very small private companies. He suggested in his research that possibly creditors of very small private companies will trust on financial indicators if the information regarding liquidity will be readily available to public.

Edmans, Fand and Zur (2011) argued that stock liquidity affected the block holder’s choice of governance mechanism as hedge funds are unconstrained by legal restriction. The result told that liquidity does not restrict block holders from governing. He examined in his research with the help of correlation coefficients that to draw the attention of huge stakeholders of an corporation or to administer them successfully then the liquidity of the enterprise should be effective and it will be constructive.

Sarlija and Harc (2012) investigated that the capital accumulation has been affected by liquidity. He argued in some countries, the liquid firms financed by their own capital rather than outsiders and they were less leveraged. He demonstrated that increasing the level of inventory leads to an increase in debt of the company and increasing level of cash in current assets leads to decrease in debt long term as well as short term. He examined in his research with the help of Pearson correlation coefficient that there is negative relationship between liquidity and capital structure. He also concluded that the share of retained earning s as well as equity to capital is not correlated with equity.

Uremadu and Efobi (2012) analyzed the importance of capital structure to corporate financial stability, growth and adequate returns and liquidity cannot be undermined. He concluded in his research with the help of multiple regression model that increasing proportion of both short term debt and long term debt on the overall liability of the firm reduces corporate profitability. He also revealed that profitability and performance of firm depend on proper management and composition of their capital structure.

Sibilkov (2009) examined that asset liquidity has major influence on capital formation. He concluded in his research with the help of multiple regression model that liquidity of assets has been positive relation with leverage. He demonstrated that lower assets liquidity reduces the cost of debt and for that reason companies use more debt. He also concluded that his research showed some relations about secured and unsecured debt. He gave details that the relation between secured debt and asset liquidity is safe and positive while the unsecured debt is negatively correlated with firm’s liquidity.

Faulkender and Petersen (2004) analyzed that in previous years the firm can get capital only due to its characteristics. However, market frictions that make capital structure may be associated with a firm’s source of capital. He concluded in his research with the help of regression model that the firms which could not get financing from the public are less versatile and that firm will be more affected than others. He also found that large firm’s capital structure decisions are constrained by the capital market.

Driffield, Mahambare and Pal (2007) analyzed that the cash flow system and capital accumulation system depend on management control and it should be separate from the other systems. The management acted to control the capital structure and assure the investor’s protection. He investigated in his research with the help of Tobin’s Q that family owned business had higher control on their cash flows and management and their business has not been performed well as non family owned business.

Udomsirikul, jumreornvong and jiraporn (2011) examined that the firm which have equity composition that is more liquid get the benefit of lower cost equity. These corporations also encouraged to have more equity rather than debt in their capital. He concluded in his research that Thailand is an rising economy and move towards achievements has a banking system which provides debt and has high absorption of commercial ownership.

Weston (2005) analyzed that the fees charged by investment bank are lesser for those who have more liquid stock. He concluded in his research that when the company who desire to lift up equity through outsiders then


226

issuance cost should be kept in mind and are an implicit expenditure of external equity. Shivdassani and stefanscu (2010) analyzed the capital structure implication defined benefit corporate

pension plan. He concluded in his research with the help of regression model that the organizations settle their leverage ratio to judge the firm pension asset. He also found that discouraging pension policies in capital structures test have the risk and it is most important and it is related to business features.

In conclusion, it should come to the knowledge that there is a strong relation between liquidity and capital formation and leverage is positively related to asset liquidity. The last but not least is that to control the enterprise more efficiently and effectively liquidity can be helpful and it will also enabling them to invite more stakeholders and to improve the performance. 3. Data And Methodology

Methodology is an organized technique which provides guidelines which provide guidelines to the researcher how to deduct the solution of a problem. It is a arrange system which includes the guideline or rules, measure, method to explore the particular problems in that arena. Methodology is very important area of research because researcher picks the most suitable type of methods to solve and regain particular information so that they easily make the correct decision. An authentic research design is verified that the conducted research is valid and also evaluate that the hypothesis and variables. Methodology notifies that data is consistent and not irrelevant.

Data means raw facts and figures. The word data is very wide in its meaning and come from a Latin word datum which means to “give something”. Data is the vital source and without it nothing can be find or possible to do research. Information is also play vital role in research. Researcher collects data from the financial statement of different textile firms. a) Data Sample

Data mean accumulation of raw statistics, numbers, amounts and features to analyze these for decision making. There is availability of two types of data collection sources through primary source and secondary source. In this research our area of focus for data is secondary sources in which we analyses the articles and different research papers. Another medium for data collection is the use of web sites of banks to find their financial statements information. I collect date of the time period which is most recent i.e. 2007, 2008, 2009, 2010 and 2011. The data is reliable and verified from Karachi Stock Exchange.

Researcher chooses the textile sector and there are 101 companies listed in Karachi Stock Exchange and select only 10 corporation of the textile sector and all are listed in Karachi Stock Exchange. The Karachi Stock Exchange was established in 1947. The firms which have highest market capitalization and market share are listed in top hundred companies which structure the 100 index. Karachi Stock Exchange is most leading exchange in Pakistan. The KSE are operating through electronic system which has linked with other market of the world. There are 34 sectors in KSE and every sector includes a wide range of companies. b) Sampling Technique

Researcher uses the fish bowl sampling technique in my research. It is also called lottery sampling. It is the most commonly used method in the research. In this method, there is a need for a complete listing of the members of population. Then the names or codes of all members are written on a piece of paper cards and placed on a container. The researcher draws the desired number of sample from the container. This process is relatively easy for small population but relatively difficult and also time consuming for large population. c) Result Analysis Techniques

Descriptive Statistics briefly summarizes a given data, which represent the entire population. Two approaches are used to investigate the data i.e. measure of central tendency and measure of dispersion. Measure


227

of central tendency consists of mean, median and mode whereas the measure of dispersion comprises of standard deviation, minimum and maximum, kurtosis and skewness. It provides simple summaries about the sample. It helps to simplify the large amounts of data in rational way. It reduces lots of data. Correlation is a statistical approach which represent the relationship of variables either they move in same direction or not. Correlation is very helpful for large scale investment portfolio. A negative movement suggests that one variable consistently moves up while the other moves down. A positive interpretation suggests that there is a tendency for the pair of markets move in the same direction.

Regression analysis is a statistical approach used to explain the relationship between variables. It comprises of many techniques for analyzing several variables, and the focus is on the link between dependent variable with independent variable. There are two types of regression which are linear regression and multiple regression. To demonstrate the result by using one independent variable we use linear regression whereas multiple regression operate with two or more variables to foretell the outcome. The common form of regression is, Linear Regression A = β0 + βB + u Multiple Regression A = β0 + β1B1 + β2B2 + β3B3 +........ + βtBt + μ Where, A= the variable we are trying to forecast B= the variable that we are using to calculate A β0= the intercept β= the slope μ = error term d) Empirical Models ICR= β0+β1ART1+ β2CCC2+ β3CR3+ β4CRA4+ β5ITR5+μ DR= β0+β1ART1+ β2CCC2+ β3CR3+ β4CRA4+ β5ITR5+μ DER= β0+β1ART1+ β2CCC2+ β3CR3+ β4CRA4+ β5ITR5+μ Here, ICR represents the Interest Coverage Ratio DR represents the Debt Ratio DER represents the Debt Equity Ratio ART represents the Account Receivable Turnover Ratio CCC represents the Cash Conversion Cycle CR represents the Current Ratio CRA represents the Cash Ratio ITR represents the Inventory Turnover Ratio e) Variable Definitions Current Ratio Current Ratio demonstrates the proportion of current assets and current liabilities of a company. The equation is as follows,

………………………………..……………1

1. Cash Ratio


228

Cash Ratio represent the strengthen of cash in hand of a corporation. Cash Ratio is the improved form of the Quick Ratio and is more conservative approach. It describes that how quickly a company can write off its short term debt. The formula is as under,

……………………...…………….………..2

2. Account Receivable Turnover Ratio

Account receivable turnover is the ratio of net credit sales to average account receivables. It is an activity ratio and it measure that how many times a company collect its receivables during a period. It can be calculated as under,

…….………3

3. Inventory Turnover Ratio Inventory turnover ratio is the ratio of cost of goods sold to average stock. It quantify that how many times a business sell and replace its inventory in a year.

…………………..……..…..4

1. Cash Conversion Cycle Cash conversion cycle is the process where the company purchases inventory, sell the stock on credit as an

account receivable and then collect the receivables and revolve it into cash. The company needs cash to pay its payables. It is favorable to have shorter cycle than long cash conversion cycle. Formula,

……………………5

1. Debt Equity Ratio This ratio differentiate that how much an organization is dependent on debt and how much depend on equity.

This equation depicts the relationship between long term liability and shareholder’s fund.

………………………….………….6

2. Debt Ratio A measurement representing the percentage of a corporation's assets which are financed with loan more than

one year. Formula,

………………………………….…………7


229

3. Interest Coverage Ratio The Interest coverage ratio explains the number of times a company could make the interest payment from its earning before its tax and interest. The formula of is as under,

………….……….8

f) Hypothesis Ho= The liquidity ratios has no significant impact on capital structure ratios. H1= The liquidity ratios has significant impact on capital structure ratios. Ho= There is no significant relationship between current ratio and capital structure ratios. H1= There is significant relationship between current ratio and capital structure ratios. g) Results And Discussion

Researcher use three technique descriptive statistics, correlation and regression. Table 1 shows the result of descriptive statistics of data of 10 companies of textile sector which is sample size of research. Mean shows the average of all the values of both dependent and independent variables. In which the mean, median, Minimum, Maximum, Standard deviation, skewness, kurtosis, probability and Jarque-Bera are find from the all variables of the panel data consists of 50 observations. Mean shows the average of all the values of both dependent and independent variables. Mean of Account Receivable Turnover Ratio (ART) is 12.399 Times which is most supportive. On the other hand, Cash Conversion Cycle (CCC) shows a less favorable mean as compared to Account Receivable Turnover Ratio (ART). Mean of Current Ratio (CR) is 1.026 Times which show positive result is also. Mean of Cash Ratio (CRA) is 2.1596% which is suitable. Debt Equity Ratio (DER) having the mean that is 2.1546 Times this is significant. Mean of Debt Ratio (DR) is 0.648 Times which shows that total asset is greater than total liability. Mean of Interest Coverage Ratio (ICR) is 1.844 Times which is very favorable. Mean of Inventory Turnover Ratio (ITR) is 6.1398 Times which is also favorable.

The standard deviation means the variability or deviation in the value of mean. Account Receivable Turnover Ratio (ART) has the highest Standard Deviation that is 9.416. It means that its value vary too much that is not significant. Inventory Turnover Ratio (ITR) has less Standard Deviation than the Account Receivable Turnover Ratio which is 6.506 that is also not significant. Standard Deviation of Cash Ratio (CRA) is 2.168 which is significant than the Account Receivable Turnover Ratio (ART) and Inventory Turnover Ratio (ITR). Debt Equity Ratio (DER) and Time interest earned have the Standard Deviation 1.038 and 1.042 which is also significant. Current Ratio (CR) has the lowest Standard Deviation that is 0.28 which shows that Current Ratio (CR) less deviate than all the variables.

The skewness for a normal distribution should be zero and for a symmetric is must be near to zero. The perfect evidence for perfectly symmetrical is if the skewness = 0, but in real world skewness of exact zero is quite distinctive. The following are the idea to understand this concept: If the skewness is between -−½ and +½, the distribution should be consider approximately symmetric. If the skewness is between -1 or bigger than +1, the distribution should be consider highly skewed. If the skewness is between -1 and −½ or between +½ and +1, the distribution should be consider moderately skewed.

The variables which have positive skewness are Account Receivable Turnover Ratio (ART), Cash Conversion Cycle (CCC), Current Ratio (CR), Cash Ratio (CRA), Debt Equity Ratio (DER), Interest Coverage Ratio (ICR) and Inventory Turnover Ratio (ITR). And the variable which has negative skewness is only one variable that is Debt Ratio (DR) which has skewness -0.54532.


230

A normal distribution with a kurtosis >3 is called as leptokurtic by which it mean that as compare to normal distribution its central peak is sharper and higher& its tails are fatter and longer. The variables which have kurtosis more than 3 are Account Receivable Turnover Ratio (ART) which is 7.124, Cash Conversion Cycle (CCC) that is 13.457, Current Ratio (CR) which has kurtosis of 5.527, Cash Ratio (CRA) 13.698, Times Interest Earned 4.196, and Inventory Turnover Ratio (ITR) 38.0211. A normal distribution with a kurtosis <3 is known as playkurtic by which it mean that as compare to normal distribution its central peak broader and lower & its tails are shorter and thinner like Debt Ratio (DR) and Debt Equity Ratio (DER) which has kurtosis 2.4874 and 2.5587 respectively.

Table2 shows the correlation matrix of the independent variables .Correlation shows the degree to which two or more variable has tendency to vary together. Correlation is positive when the values move in same direction but when they move in opposite direction correlation is negative. In this matrix Account Receivable Turnover is positively correlated with Cash Ratio (CRA) and Inventory Turnover (ITR) and negatively correlated with Cash Conversion Cycle (CCC) and Current Ratio (CR). Cash Conversion Cycle (CCC) is positively associated with CR and negatively associated with ART, CRA and ITR. Current Ratio (CR) has positive correlation only with CCC and has negative correlation with the remaining independent variables. Cash Ratio (CRA) has positive correlation with CRA only. The last variable Inventory Turnover Ratio (ITR) is positively correlated with ART and has negatively correlated with CCC, CR and CRA. The table 3 shows the regression results of dependent variables which are Interest Coverage Ratio (ICR), Debt Ratio (DR) and Debt Equity Ratio (DER). The first piece represents the coefficient for each independent variable that is showing the strength of influence. Second column represents the T-Statistics values which are showing the significance of the regression results. T-Statistics shows the relationship between dependent variables and independent variable.

Interest Coverage Ratio (ICR) has positive coefficient with Account Receivable Turnover Ratio (ART), Current Ratio (CR) and Cash Ratio (CRA) and negative coefficient with Cash Conversion Cycle (CCC) and Inventory Turnover Ratio (ITR). Debt Ratio (DR) has positive coefficient with Account Receivable Turnover Ratio (ART) and Cash Conversion Cycle (CCC) and negative coefficient with Current Ratio (CR), Cash Ratio (CRA) and Inventory Turnover Ratio (ITR). The last but not least dependent variable Debt Equity Ratio (DER) has positive Coefficient with Account Receivable Turnover Ratio (ART) and Cash Conversion Cycle (CCC) and negative coefficient with Current Ratio (CR), Cash Ratio (CRA) and Inventory Turnover Ratio (ITR).

The significance level of T-Statistics is 2. If the T-Statistics is greater than 2, it means that it actually shows relationship. In the above table, dependent variable Interest Coverage Ratio (ICR) has positive relationship with Current Ratio and negative relation with Cash Conversion Cycle. Debt Ratio show affirmative relationship with Cash Conversion Cycle and pessimistic relationship with Current Ratio. The last dependent variable Debt Equity Ratio show positive relationship with Cash Conversion Cycle and negative relationship with Current Ratio and the remaining independent variables are not showing any relationship because their T-Statistics is less than 2. R-Square of Interest Coverage Ratio (ICR) is 0.58051 which is favorable and it means that 58% samples describe Interest Coverage Ratio (ICR). The remaining 42% variation in Interest Coverage Ratio (ICR) is unexplained by the independent variable. F-Statistics of Interest Coverage Ratio (ICR) is 12.1778 which shows the fitness of the model, and that is significant.

R-Square of Debt Ratio (DR) is 0.46377 which is also favorable and it means that 46% samples describe Debt Ratio (DR). The remaining 54% variation in Debt Ratio (DR) is unexplained by the independent variable. F-Statistics of Debt Ratio (DR) is 7.6108 which is also favorable. R-Square of Debt Equity Ratio (DER) is 0.361298 which is significant and it means 36% sample describe Debt


231

Equity Ratio (DER). The remaining 64% variation in Debt Equity Ratio (DER) is unexplained by the independent variable. F- Statistics of Debt Equity Ratio (DER) is 4.9779 which also demonstrate that it is favorable. h) Conclusions And Recommendations

The main theme of this research or purpose of conducting the research is to evaluate the impact of liquidity on capital structure. Researcher has taken 10 companies which are listed in Karachi Stock Exchange of textile sector. The result shows that liquidity has impact on capital accumulation but it has not significant impact on capital structure. Cash Conversion Cycle and Current Ratio has significant impact on capital structure variables i.e. Interest Coverage Ratio, Debt Ratio and Debt Equity Ratio. The regression model reveals that the fitness of overall model is very good. So as the Cash Conversion Cycle will be lesser, it will show the positive result to textile sector. On the other hand Current Ratio should lie between 2:1. If it exceeds that limit, it shows that the company’s current assets are higher and they are not utilizing them properly and just they are adding in their assets and are not getting profit from these assets. Cash Conversion Cycle should be lower as possible. Account Receivable Turnover Ratio does not show significant relationship with the liquidity variables because they are not recovering their receivables timely and it will also affect the payable turnover ratio.

On the other hand, the opposite scenario is that if as much as their Account Receivable Turnover Ratio is lesser, it will be positive for the company and a positive point when investors evaluate the liquidity. Cash Ratio also does not show positive relationship with the liquidity because the company has more cash in their hand and banks and they are not utilizing them properly and are not using the cash in some other investments. The company should have cash in hand and in banks as lower as possible and utilize them in some other source and get profit to stabilize them. Inventory Turnover Ratio has negative relationship with the liquidity because the company does not pay their debts properly or their cost of goods sold is higher.

The liquidity has least impact on capital structure of textile sector because the particular sector is not performing well due to shortage of electricity, gas shortage, poor economic conditions, unemployment etc. The Govt. impose additional restrictions, increase the tariffs and taxes on income and sales, it overall effect the company performance. When the company needs additional capital for expanding their business or for purchase of a plant which can enhance the productivity, the investor analyze the liquidity of that particular company and also consider the sector to which they are providing investment. If the condition of a particular sector is well and liquidity of the company is good, then the investors invest in that particular sector. On the other hand, if the condition of the sector is not well and they have the problem of electricity shortage, gas shortage etc. as the current situation, the liquidity will automatically be unfavorable and the investors will not invest in that company. So liquidity has some impact on capital structure because investors focus on liquidity as well as the condition of the sector and also consider the reputation of that company. Recommendations

If the liquidity of the company is very good and favorable then it will get additional capital easily and maintain their capital structure as they want. The liquidity of the organizations which are reflected in an ongoing ability of meeting the financial obligations affect’s the firm capital structure. The companies should keep in mind the importance and role of money in the liquidity. In order to maintain liquidity and thereby influence on capital structure, the companies must be aware of importance of managing liquid assets. Reference 1. Morellec, E. (2001). Asset liquidity, capital structure, and secured debt. Journal of 2. Financial Economics, 61, 173–206. 3. Mramor, D., & Valentincic, A. (2003). Forecasting the liquidity of very small private companies . Journal


232

of Business Venturing, 18, 745–771. 4. Ofumbia, S. U., & Uchenna, R, E. (2012). The Impact of Capital Structure and Liquidity on Corporate

Returns in Nigeria: Evidence from Manufacturing Firms. International Journal of Academic Research in Accounting, Finance and Management Sciences.2, ( 3),1-16.

5. Natasa, S., & Martina, H. (2012). The impact of liquidity on the capital structure: a case study of Croatian firms. Business Systems Research, 3(1), 30-36.

6. Driffield, N., Vidya, M., & Sarmistha, P. (2007). How does ownership structure affect capital structure and firm value? : Recent evidence from East Asia. Economics of Transition, 15(3), 535–573.

7. Sibilkov, V. (2009). Asset Liquidity and Capital Structure. Journal of financial and quantitative analysis , 44( 5), 1173–1196.

8. Udomsirikula, P., umreornvongb, S ., & Jirapornb, P.(2011).Liquidity and capital structure: The case of Thailand. Journal of Multinational Financial Management, 21,106–117.

9. Shivdasani, A., & Stefanescu, I. (2010).How Do Pensions Affect Corporate Capital Structure Decisions?. The Review of Financial Studies ,23( 3 ),1288-1333.

10. Lipson, L. M., & Mortal, S. (2012). The impact of liquidity on the capital structure: a Case study of Croatian firms. Journal of Financial Markets, 12(4), 611-6

Table 1: Descriptive Statistics

ART

CCC

CR

CRA

DER

DR

ICR

ITR

Mean 12.39946 138.7188 1.0268 2.1596 2.1546 0.648 1.8442 6.1398

Median 9.940326 87.59223 0.99 1.68 1.905 0.655 1.47 4.85

Maximum 47.52604 924.5372 2.07 13.02 4.68 0.82 5.16 48.66

Minimum 0.460638 13.18103 0.61 0.19 0.72 0.42 0.47 1.73

Std. Dev. 9.415998 185.5326 0.280032 2.168065 1.038866 0.114268 1.042113 6.506264

Skewness 1.873221 3.365216 1.312616 2.739795 0.617724 -0.54532 1.365559 5.729604

Kurtosis 7.124387 13.45764 5.52717 13.69873 2.558717 2.487456 4.19663 38.02112

Probability 0 0 0.000001 0 0.166497 0.220314 0.000095 0

Sum 619.9729 6935.941 51.34 107.98 107.73 32.4 92.21 306.99

Sum Sq. Dev. 4344.39 1686695 3.842488 230.3248 52.88284 0.6398 53.21402 2074.242

Observations 50 50 50 50 50 50 50 50

Table 2 Correlation

ART CCC CR

CRA

ITR

ART 1 - -

-

CCC -0.45082 1 -

-

-

CR -0.04479 0.463231 1

-

-

CRA 0.104536 -0.22181 -0.08603 1

-

ITR 0.21504 -0.26339 -0.04508 -0.06959 1


233

Table 3: Regression