The impact of capital structure on the performance efficiency of Baltic listed companies


  • Rasa Norvaisiene Kaunas University of Technology



capital structure, financial leverage, corporate finances, financial decisions, efficiency of corporate performance


The capital structure can influence the behavior of the company as well as its performance results and its value. However, the effect can be quite different.

The financial indicators of Lithuanian, Latvian and Estonian listed companies published in their annual reports have been used in order to investigate the impact of capital structure on performance efficiency of the companies. The research included data of only non-financial companies, because the capital structure of financial institutions is specific and the performance efficiency of these companies is affected in completely different way. The research covers the period of 2002 – 2011. Data of 70 companies: 28 Lithuanian companies, 14 Estonian companies, and 28 Latvian companies were used.

In order to examine the interaction of capital structure with the companies’ performance efficiency, the correlation analysis between the indicators of indebtedness level (long-term financial debt ratio, short-term financial debt ratio, financial debt ratio, non-financial debt ratio) and the following performance indicators: operating profit margin, net profit margin, return on equity, return on assets, liquidity ratio, capital asset turnover and total asset turnover was performed. The p-value was used to verify the reliability of observed correlation. In order to estimate the strength of the influence of indebtedness on performance efficiency of the companies, the multivariate regression analysis was performed. During the regression analysis, the indicators describing performance efficiency of the companies we used as dependent variables and financial and non-financial debt ratios were used as independent variables.

The research evidenced that the higher financial indebtedness level affects negatively the profitability ratios of companies in the Baltic countries; also both financial and non-financial debts reduce the liquidity of the companies. It was also found that influence of the debts on the efficiency of asset management is ambivalent: financial debt has a negative impact on capital asset turnover and total asset turnover, but higher level of non-financial debts leads to higher level of the turnover indicators.


Author Biography

Rasa Norvaisiene, Kaunas University of Technology

Assoc.Prof. Dr. of Social Sciences (Management and Administration), Kaunas University of Technology, Faculty of Economics and Management, Department of Finance

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