We analyze the determinants of capital structure and its choice by small and medium-sized enterprises in Central and Eastern Europe from 2002 to 2007. We test the relevance of the three main theories: the Static Tradeoff theory, the Pecking Order theory, and the Agency Theory; which have been derived primarily for developed markets; while our knowledge on their validity for emerging European countries is limited. We confirm the positive impact of size and asset tangibility on the leverage, while rejecting both the positive impact of profitability and tax as well as the negative impact of business risk and non-debt tax shields. We report that SMEs behave homogeneously, and the relevant capital structure determinants show remarkable steadiness. Our results show a special time varying behavior, in which the relevant determinants become stronger, while most of the country-specific factors present weakening effects. We argue that firms of the CEE countries remarkably converged their financial decision-making procedure to that of developed countries through the investigated period. The relevance of Tradeoff theory is weak, as firms respect a one-sided upper threshold rather than converging to a fixed target on both sides, while they are not indifferent to the hierarchy of financing alternatives.

This paper analyzes the capital structure and the choice of financing alternatives across a broad sample of Central and Eastern European companies. Our investigation is built on two methods: the first concentrates on capital structure decisions through quantitative information applying panel regression for the period 2005-2008 to allow a closer look at the strength of the pecking order and static tradeoff theories; and the second extends the analysis with a qualitative questionnaire on the explicit and latent preferences behind financing policy. The same set of randomly selected 498 firms that fairly represent size classes and countries by the weight of their economic performance are investigated. The CFOs' answers reflect a pecking order driven behavior, with a limited role for the target leverage ratio; this is confirmed by the estimated coefficients of the panel regression.

Seminar paper from the year 2010 in the subject Business economics - Investment and Finance, grade: 1,5, European School of Business Reutlingen, course: Lecture, language: English, abstract: Taking into consideration the assumptions behind classical capital structures on the one hand and the specific economic environment and the resulting behavior of firms in the emerging European economies on the other hand, it is clear that these extraordinary circumstances (different political and economic systems) influence the determination of the firms' capital structures in these countries in a special way. The goal of this paper is to determine the driving factors for different capital structure choices in emerging European economies, compared to the one we can see for instance in Western European countries. As a result of the underlying research on this topic and also considering the fact that shareholders are slowly gaining influence in businesses in emerging European economies (like Slovenia), the financial principal behavior of these companies will probably remain different from those in mature market economies. One of the most interesting findings regarding the research topic is probably the fact that we can find a re-designed Pecking Order Theory in some Eastern and Central European (CEE) economies.

The paper presents evidence of actual and target capital structures of firms in five EU accession countries of Central and Eastern Europe and the former Soviet Union (Bulgaria, the Czech Republic, Poland, Romania and Estonia). We consider the financial constraints of private companies and compare the level of indebtedness and the determinants firms' choices of capital structure in selected EU accession countries and EU countries. A dynamic non-linear adjustment model is adopted to explicitly model the adjustment of a firm's leverage to a target leverage.

Addresses the challenge Hungary faces in overcoming threatening deficits in its current and fiscal accounts without hampering economic growth. The Hungarian economy is emerging from a severe four-year recession with positive developments on numerous economic fronts, but with major weaknesses remaining because of large current and fiscal account deficits. This book addresses the challenge Hungary faces in overcoming these deficits without hampering economic growth. The report examines the country's macroeconomic performance in the first half of the 1990s and the stabilization package launched in March 1995. It explores the structure of fiscal revenues, pension reform, and enterprise and banking reforms. The study also looks at the impact of structural reforms on future economic growth and at Hungary's bid to integrate with the European Union.